Retirement provision at the turn of the year: start in December or January?
Mikhail Iankovski, M.Sc.
Published in October 2026
Reading time 7 min
Every November the same question comes up: is it worth starting retirement provision in December, or can it wait until January? The answer depends on what actually happens on 31 December. Four things genuinely change at the turn of the year, and one of them has an effect right up to the final year of the contract. This article sets them out, with a worked example, so that the decision rests on facts rather than time pressure.
First: the 2026 tax allowance applies only to 2026
The tax allowances for retirement provision are annual amounts. What is not used in one year generally cannot be carried into the next.
- Basisrente. Contributions count as special expenses in the year of payment (§ 11 Abs. 2 EStG). The 2026 ceiling is €30,826, or €61,652 for jointly assessed spouses. It covers all basic provision, including statutory pension insurance or a professional pension fund. Whatever remains unused in 2026 lapses.
- Company pension. Contributions of up to €8,112 are tax-free in 2026, which is 8% of the contribution assessment ceiling (§ 3 Nr. 63 EStG). According to the Federal Ministry of Finance circular of 12.08.2021, this is an annual amount that is not reduced pro rata when a contract starts during the year. A contract starting in December can therefore in principle still use the 2026 allowance.
The catch: a single monthly contribution in December barely uses this allowance. Only a one-off or special payment made in 2026 has a real effect. Whether such a payment is possible, and in what amount, depends on the tariff and, for company pensions, on the agreement with the employer. How much of the Basisrente ceiling is already taken up by the statutory pension or a professional pension fund is for the tax advisor to determine.
Second: entry age and term, depending on the tariff
Insurers work with a calculated entry age, and there is no uniform statutory rule for it. Some tariffs use the calendar-year method: the entry age is the start year minus the year of birth. Someone born in 1980 has a calculated entry age of 46 with a December 2026 start and of 47 with a January 2027 start. Other tariffs use the half-year method, under which a person counts as one year older six months before their birthday. There, what counts is the distance to the birthday, not the turn of the year.
Where the calendar-year method applies, a start before the turn of the year has two consequences. The terms can be based on a lower age. And if the start of the pension is agreed as a calculated age, such as 67, a contract starting in December has one more policy year than the same contract starting in January.
calculated entry age 46, maturity 1 December 2047
calculated entry age 47, maturity 1 January 2047
Simplified illustration: maturity at calculated age 67, depending on the tariff. The extra year means more contributions and investment time, but also a later pension start in calendar terms. Future performance is open; fund investments fluctuate.
The extra year means eleven more months of contributions and investment time at the end of the term, when, given positive performance, the balance is usually at its highest. It does not come free: you pay in during that year, and your pension starts eleven months later in calendar terms, at the same calculated age. What this amounts to depends on investment performance; no particular additional return can be promised. Which method applies and how the pension start is agreed is set out in the tariff conditions and belongs in every consultation.
A worked example makes the scale tangible. It assumes a contribution of €300 a month and constant growth of 6% a year, before costs and tax. Starting in January 2027, 20 policy years produce capital of €136,694; starting in December 2026, 21 policy years produce €148,611. Of the difference of €11,917, only €3,600 is additional contributions; €8,317 comes from investment growth, because the extra year acts on capital already built up; the additional amount results from the longer term. The assumption is not a forecast, and costs and tax reduce the result. With lower growth the difference is smaller, and losses can wipe it out.
Assumptions: born 1980, tariff using the calendar-year method, contributions paid monthly in advance, constant growth of 6% a year, before costs, tax and charges. Not a forecast: actual performance fluctuates and can be negative. With the December contract, the pension starts later in calendar terms.
Third: periods start with the contract
An employer-funded pension promise vests if employment ends after the employee's 21st birthday and the promise has existed for at least 3 years, counted from the start of the insurance or, for an Unterstützungskasse, from admission to the group of beneficiaries (§ 1b BetrAVG). Promises funded by salary conversion vest immediately. A December start begins the period one month earlier than a January start. That is a small but real difference, not a reason to rush.
Fourth: Riester under the previous model ends
Under the Retirement Provision Reform Act, no new Riester contracts under the previous model can be concluded from 2027. Contracts concluded by 31 December 2026 keep their subsidies. From 1 January 2027, new subsidised products follow, including a retirement investment account (Altersvorsorgedepot). To be honest: for some savers the new model may be the better fit. Anyone who deliberately wants the previous model, however, has to sign in 2026.
Basisrente and § 3 Nr. 63 EStG apply only to payments made in 2026
only for tariffs using the calendar-year method, not the half-year method
new subsidised products from 2027; existing contracts continue
to the same calculated retirement age; pension starts later in calendar terms
One month or one year? It depends on the reference point
Measured against the same calendar date for the pension start, a start on 1 December rather than 1 January makes exactly one month of difference: one more monthly contribution and one more month of investment time. Tax periods such as the twelve years required for half taxation of a lump-sum payment from private pension insurance (§ 20 Abs. 1 Nr. 6 EStG) are likewise counted to the day. Measured against the same calculated retirement age, as is often agreed, tariffs using the calendar-year method produce a full extra policy year. Both calculations are correct. Which one fits your case depends on whether you set the pension start by calculated age or by date.
The year-end advantage therefore lies in two places: in the tax allowance that can only be used in 2026 and, depending on the tariff, in entry age and term. Both can be checked in concrete terms.
For shareholder-managing directors: the Unterstützungskasse
The reinsured Unterstützungskasse has no fixed annual allowance that lapses. The GmbH's allocations are a business expense in the financial year (§ 4d EStG), and the yardstick is the appropriateness of the pension. Allocations follow regular contributions of constant or rising amounts (§ 4d Abs. 1 Nr. 1 Buchst. c EStG); a one-off payment at year end is not part of this route. If the allocation is still to reduce the 2026 profit, eligibility, the shareholder resolution and the pension promise must be in place first. For a December start this is tight, but not ruled out in coordination with the tax advisor. I describe the timeline in the article Deducting an ETF savings plan from tax and the mechanics in the article on the Unterstützungskasse for shareholder-managing directors.
Starting provision in December can achieve more than one month: depending on the tariff, it brings a lower entry age and one extra policy year to the same retirement age, with a later pension start in calendar terms as the counterpart. Added to this are the 2026 tax allowance, which can only be used with payments made in 2026, and for the previous Riester model the last date to sign. Whether this pays off in your situation is decided by the tariff, your tax rate and your liquidity, not by the calendar alone.
Frequently asked questions
Is it worth starting retirement provision in December?
It depends on what you want to use. The 2026 tax allowance for the Basisrente and company pensions applies only to payments made in 2026 and otherwise lapses. Depending on the tariff, a start before the turn of the year can also lead to a lower calculated entry age. If the pension start is agreed as a calculated age, the contract under these tariffs also has one more policy year; the pension then starts correspondingly later in calendar terms.
Does a December start give one more policy year?
Depending on the tariff, yes. If the tariff calculates the entry age by calendar year and the pension start is agreed as a calculated age, a contract starting in December 2026 runs one policy year longer, to the same calculated retirement age, than one starting in January 2027. That means more contributions and investment time, but also a later pension start in calendar terms. No particular additional return can be derived from this.
Can I still use the full 2026 allowance with a contract starting in December?
In principle yes, if enough is paid in 2026. According to the Federal Ministry of Finance circular of 12.08.2021, the tax-free company pension allowance of €8,112 is an annual amount without pro rata reduction, and the Basisrente counts in the year of payment. A single monthly contribution barely uses the allowance, however; that requires a one-off or special payment, where the tariff and the agreement allow it.
Can I still take out a Riester contract in 2027?
Not under the previous model. Under the Retirement Provision Reform Act, new Riester contracts are only possible until 31 December 2026; existing contracts keep their subsidies. From 1 January 2027 there are new subsidised products, including a retirement investment account, which may suit some savers better.
Further reading
- Deducting an ETF savings plan from tax: what really works, for the self-employed and shareholder-managing directors
- Retirement provision for freelancers: why the professional pension fund is a building block, not a foundation
- Direct insurance or Unterstützungskasse: comparing the funding routes
Want to know what can still be sensibly put in place for you before 31 December? In an initial consultation we review your starting position, tax allowance and timeline, as a basis for coordination with your tax advisor.
This content is general information and no substitute for individual tax, legal or investment advice. Tax structuring is carried out in coordination with the client's tax advisor. Statements on entry age, term, one-off payments and fund investment apply depending on the tariff; capital market investments are subject to fluctuation. Legal bases: § 10 Abs. 3 EStG, § 11 Abs. 2 EStG, § 3 Nr. 63 EStG, § 4d EStG, § 20 Abs. 1 Nr. 6 EStG, § 1b BetrAVG, Federal Ministry of Finance circular of 12.08.2021; Riester cut-off under the Retirement Provision Reform Act 2026; 2026 values per the German Social Insurance Reference Values Ordinance 2026.