Germany's latest pension reform is now law. The ‘Altersvorsorgedepot’ (AVD) launches on 1 January 2027, and industry jostling for market position is already underway in advance of the starter’s gun. At first glance, the opportunity it presents for cross-border funds looks significant, however, in practice, the picture is more nuanced, and more actionable, than reported headline numbers suggest.

The AVD is Germany's new state-supported retirement investment account. It launches on 1 January 2027 and replaces the Riester pension for new business. More than a policy update, AVD redesigns how Germany's subsidised retail retirement market works.

German pension reform at a glance

From insurance to investment

The Riester model was built on insurance while the AVD is built on investment. It opens subsidised retirement savings to ETFs, actively managed UCITS funds, and some eligible ELTIFs, which has far more access to capital-market products than Riester allowed.

There are three tiers across three different markets:

• Standarddepot is the mass-market default. It holds two funds chosen by the provider (one equity, one bond under a hard 1% cost cap).
• Flexible AVD is for self-directed and advised savers. There is no cost cap and no two-fund limit, so actively managed UCITS funds, ETFs, and some ELTIFs are all available.
• Guaranteed products offer 80% or 100% capital protection and are mostly the preserve of life insurers.

Here are the five questions managers should be asking about the AVD right now

1. Is the AVD investment opportunity really as big as it looks?

Broadly, yes, though the shape of the opportunity matters as much as its size.

S&P Global Ratings estimates the reform could generate between €26 billion and €56 billion in additional annual net inflows once the system is fully operational. That compares to approximately €8.4 billion invested in Riester (a state subsidized private pension scheme) products in 2024. The jump is significant. About 16 million existing Riester contracts are expected to migrate to the AVD, plus an estimated 10 million contracts for German citizens who currently have no subsidised pension provision at all. Many of these are self-employed individuals newly eligible for state subsidies under the reformed framework.

The state subsidy structure gives the reform meaningful pull. Savers contribute up to €1,800 per year and can receive a base annual subsidy of €540, rising sharply for families with children.

Under the transition, providers will not just be competing for new money, they will be competing to convert the existing 16 million Riester contract holders. Whoever secures those migration conversations before January 2027 will have a strong head start in the market.

So yes, the AVD investment opportunity is real, but that opportunity will require early preparation.

2. Is this an ETF-only market?

No, but ETFs will likely dominate the tier that most savers end up in because the AVD is explicitly designed to increase price competition and ETFs tend to be low-cost investment products which would appear well suited to matching its needs on this front.

The AVD product architecture has three distinct layers, and the opportunity for cross-border active managers differs sharply across each.

• The Standarddepot is the mass-market default retirement offering. It consists of just two provider-designated funds:
  • One equity building block
  • One bond building block with a hard cost fee cap of 1%
  The platform picks the funds; the saver does nothing. Given that its combined fee cap must cover both the fund's total expense ratio (TER) and the platform's administration margin, the favorite’s tag for capturing passive ETFs priced at 0.20% or below. Scalable Capital has already announced zero-fee savings plans across its full ETF universe with Trade Republic, ING, and DKB following.
• The AVD retirement investment structure available for self-directed and advised savers carries no cost cap and is not restricted to two funds. Investors can access actively managed UCITS and ETFs within the AVD. ELTIFs are also accessible, subject to a risk class filter which excludes most buyout private equity but accommodates infrastructure, core real estate, and defensive private credit strategies.
• The guaranteed products, with 80% or 100% capital protection, are structurally less relevant for most asset managers and tend to be the preserve of life insurers.

A key takeaway: the Standarddepot default is essentially an ETF market. The broader AVD is an ‘everything-else’ market. Active managers, multi-asset specialists, and alternatives providers compete in the second tier, which is smaller in terms of early flow volume but larger in terms of margin, and likely to grow as savers become more comfortable with equity-based pension saving and seek differentiation.

3. Have the local players already won the lion’s share of AVD business?

In the branch-banking segment, largely yes. But the distribution map is more fragmented than it seems.

The structure of German retail banking means that the two dominant cooperative banking networks - the Sparkassen-Finanzgruppe (savings banks) and the Volksbanken-Raiffeisenbanken (cooperative banks) - between them serve the majority of German retail banking relationships.

• Union Investment, the asset management arm of Germany's cooperative banking network, which is distributed through 700+ Volksbanken branches, has announced three AVD related products under the "UniVorsorge" label, exclusive to cooperative bank customers from January 2027.
• DekaBank, the Sparkassen's captive fund house, has confirmed it will offer AVD solutions through its 370+ savings bank partners on the same date. DWS is bringing a full product and campaign to market, distributed through the Deutsche Bank branch network. Allianz Global Investors is launching across all three product tiers in partnership with Allianz Leben.

The most common structure is to marry product manufacture and distribution channel within a single group. The margin stays in-house. The adviser does not go to market to find the best available fund, they go to the product shelf their employer has built.

That is a large and largely impenetrable segment for foreign managers operating without a local partnership. But it is not the whole market.

Some neobrokers are positioned to capture business from the digitally active, cost-sensitive saver, primarily the under-45s, and will be almost entirely passive ETF driven. These platforms have no captive product shelves and will offer open fund catalogues alongside their Standarddepot defaults. The adviser community - particularly Germany's fee-only broker Honorarberater, which is legally prohibited from earning product commissions, is also open and serves higher-net-worth savers who specifically want an alternative to the bank-branch default experience.

4. What does 'compete actively' actually mean in practice?
It means solving four specific problems, in roughly this order.

• Operational eligibility:
  • German-language Key Information Documents (KIDs) and factsheets are mandatory, not optional.
  • Notification from the German regulator BaFin must be current for the relevant share classes.
  • The fund must settle via the depositories Clearstream Frankfurt or Euroclear to pass platform onboarding screens.
  • German tax reporting through a recognized tax reporter or Steuervertreter is needed so funds qualify for the final withholding tax or Abgeltungsteuer partial exemption. Without it, individual funds are tax-disadvantaged relative to domestic alternatives at the point of comparison.

These are not new requirements; they are the same foundations that have always applied to cross-border distribution in Germany.

• Sparplan¹ eligibility on digital platforms: A fund that cannot be set up as a recurring monthly savings plan is functionally invisible in the AVD context. Savers will not make one-off lump sum purchases into a pension account. Instead, they must set up a direct debit to feed into the account over time. Getting this set up may require a conversation with the platform's partnership team, not just a technical listing.
• Clean share classes for the advised channel: Germany's Honorarberater community will not recommend a fund that pays trailer fees, as doing so would violate their regulatory obligation to act independently. A clean or Z share class with institutional pricing, no front-end load, and no retrocession is a prerequisite for this channel. Managers who currently offer only A-class retail shares into Germany need to address this before January 2027.
• A German-speaking distribution contact: There is no substitute for this. A German native speaker with relationships in the Honorarberater community, the digital platform partnership teams, and the regional IFA networks is the single highest-ROI hire a manager can make for this market. Pan-European sales coverage from London or elsewhere, where Germany is one of seven markets on the same person's territory, does not generate the depth of relationship the market requires.

For more about how to compete in Germany, read our four-step guide for cross-border managers.

5. What about private assets? Are those genuine options?

AVD opportunities for these investments are more restricted than some reports have suggested.

The legislative framework does list European Long Term Investment Funds (ELTIFs) as eligible AVD investments but there is a critical filter. Products eligible for the AVD are limited to a maximum risk class of 5 on the 1–7 Summary Risk Indicator (SRI) scale.

Most buyout private equity, venture capital, and leveraged private credit strategies carry SRI ratings of six or seven, placing them outside the eligible AVD universe, despite being ELTIF-wrapped. The strategies that do fall within scope: infrastructure, core real estate, and defensive private credit are those with stable contracted cash flows and relatively low volatility. That is a meaningful but narrower subset of the private markets universe than early optimism for alternative investments in the market implied.

For private capital managers more broadly, the more directly addressable opportunity in Germany is not the retail AVD saver, it is the German insurance company investing its own balance sheet. The 2027 Solvency II amendments are expected to significantly relax long-term equity eligibility criteria for private assets, and the European Insurance and Occupational pension authority (EIOPOA) estimates that at least €22 billion of additional equity will become eligible for preferential capital treatment as a result². That is the genuine near-term private markets opportunity in Germany, through the institutional rather than the retail channel.

The window is narrow

Germany's pension reform is a genuine structural shift, the kind that happens once in a generation. As it stands, local captive managers are well positioned to capture the majority of early flows. And that will not change.

But the non-default, self-directed, and advised segments represent tens of billions of euros of new business by 2029. The French PER pension reforms of 2019 showed that when a structural pension change occurs, the managers who secured shelf space in the first 12 months captured a disproportionate share of subsequent flows. Inertia and savings plan mechanics meant early positions were remarkably durable.

Germany in 2027 looks set to be no different. Platforms are finalizing their launch catalogues and partnership conversations need to happen now. Share class structures need to be reviewed, and German documentation needs to be completed sooner rather than later.

The managers who treat this as a product launch question, and waste time wondering if their funds qualify will find that the opportunity has moved on by the time they arrive. The managers who focus on distribution and ask: "Who are the right platform partners, adviser communities, and local relationships to build?" are the ones who will likely have something meaningful to show for it in 2028.