Germany approves a children's savings account

The German parliament has approved an early pension scheme that pays €10 a month into a supervised account for every child living and attending school in Germany, with retroactive effect for those born since 2020. The money cannot be touched until retirement age, set at 67.

Chancellor **Friedrich Merz**'s coalition has pushed the children's savings account through the federal parliament: a pension account into which the state pays **€10 a month** for every child. The scheme, known as an early pension, was approved with the votes of the conservative bloc and its Social Democrat partners. The funds are invested in the capital markets and the returns they generate are tax-exempt.

## Who can open one and how it works

Parents or guardians of all children born from **2020** onwards are eligible for the state contribution, retroactively. The payment is made each quarter into an account peine by the parents, where contributions from parents, grandparents or other guardians can also be added. Recipients are children aged between 6 and 18 who live and attend school in Germany.

The accumulated money cannot be touched until the regular retirement age, currently **67**, is reached. Once the child comes of age, the idea is that the account holder or their family keeps up the monthly contributions so the account keeps growing, in the same way as a private pension plan.

## The government's numbers

Merz's government calculates that each beneficiary will have accumulated around **€1,400** by the time they come of age, plus whatever relatives have put in. If the initial contributions are maintained and an estimated annual return of **7%** is applied, **€54,000** will have been generated by the time retirement age is reached.

The 7% figure is an estimate, not a guarantee: it depends on how the capital markets perform over decades. That is where the risk in the design lies, because the account invests in the stock market and the final outcome may fall below or above that calculation.

## The fine print of the reform

The savings account is the friendly face of the pension reform package that Merz defends as essential to secure the future of pensions. The rest of the package has sparked clashes with his coalition partners. Tensions erupted with the double resignation of **Bärbel Bas** as Minister of Social Affairs and Labour and as co-leader of the Social Democratic Party. It was an unexpected resignation, set against the reproaches the minister levelled at the conservative bloc, which she accused of having publicly criticised her over her alleged absences in the middle of a family tragedy.

She was replaced hours later by her party colleague and former leader of Rhineland-Palatinate, **Alexander Schweitzer**. Barely had the handover been formalised when Merz urged him to get to work on the ministry's challenges.

## The open front in the east of the country

Merz's reforms and cuts are drawing opposition not only from the Social Democrats but also from parts of his own conservative ranks. The most controversial point is his intention to scrap the so-called retirement at 63, which until now citizens could access without reductions after **45 years of contributions**. Much of the discontent and the drop in the conservatives' poll ratings in the east of the country, where pensions are below the level of those in the west, is attributed to that plan.

The reform is advancing in fits and starts, partly due to Social Democrat resistance to the harshest cuts in social affairs. The children's savings account, by contrast, cuts nothing: it distributes a small initial capital and leaves the bulk of the effort to families who can contribute. It is a savings-promotion measure, not a solution to the sustainability problem the rest of the package seeks to address.