Germany’s pension reform aims to turn savers into ETF investors

Germany will introduce the Altersvorsorgedepot (AVD) in 2027, a state-subsidised private pension wrapper that permits fund- and ETF-based investing within state-supported pension accounts. The reform places funds on an equal footing with insurance products and expands the types of assets savers can hold in private retirement plans.

The AVD replaces a system long structured around guarantees and capital preservation by allowing direct fund and exchange-traded fund investments inside state-supported private pensions. Germany’s fund industry association, BVI, described the reform as “almost epochal” and indicated many asset managers are preparing products for the 2027 launch.

German households hold roughly €10 trillion in wealth, with a large share kept in low-yield bank deposits. In the fourth quarter of 2025, savers placed €63 billion into cash and current accounts. Among the less-wealthy half of households, more than two-thirds of financial assets remain in bank deposits.

Policymakers and market participants view the AVD as a channel to shift a portion of those deposits into systematic retirement investing. Asset managers and exchanges are preparing product lines and distribution plans ahead of the 2027 start date.

Retail ETF use in Germany has risen in recent years. About 14.1 million people were invested in the stock market in 2025, roughly two million more than the previous year. Nearly one in two Germans under 40 contributes regularly through ETF savings plans. Research in Finance reports ETF adoption and understanding are widespread, with 91 percent of respondents using ETFs in some form.

Market data show growing flows into funds. BVI reported retail inflows to German funds reached a record €33.6 billion in the first quarter of 2026. ETFs accounted for €22.3 billion of that total, including €18.7 billion into equity ETFs. Stephan Kraus of Deutsche Börse noted broader adoption will depend on building trust in capital markets and offering simple, transparent, low-cost investment solutions.

Industry figures warned policy change may not immediately alter saver behaviour. Yorick Naeff of ABN AMRO described the reform as “structurally significant” and predicted behavioural shifts will be incremental. He recommended automation and simple default options such as auto-enrolment, payroll-linked investing and low-cost ETF default portfolios to accelerate uptake.

Oliver Behrens, CEO of flatexDEGIRO, called the reform “a vibe shift” and cautioned that Germans will not suddenly become risk-seekers. He pointed to long investment horizons, compound growth and deferred taxation as factors that could support sustained retirement saving.

Christian Schneider-Sickert, CEO of LIQID, identified the broad middle class as a potential source of new recurring flows, citing possible regular contributions of €100 to €300 per month from savers who previously did not invest systematically. He warned the reform should avoid repeating past design problems and said low costs, transparency and clear product design will influence uptake.

Market participants are preparing products and distribution channels ahead of the 2027 launch. Whether substantial sums now held in deposits move into long-term ETFs will depend on how easily products can be accessed, how costs and risks are communicated, and whether automated default solutions reach scale.