Misuse of pension schemes: use for housing purposes
Oct 30, 2025
The capital accumulated and subsidised in subsidised pension schemes for housing purposes, known as Wohn-Riester contracts, can be used by the person entitled to the allowance directly for the purchase or construction of a home until the start of the payout phase. It is also possible to use the funds to repay a loan taken out for this purpose.
In the case to be decided by the Federal Finance Court (BFH), however, the facts of the case were such that the loan to be redeemed was originally used to purchase a flat that was no longer used by the owner. The flat was sold and the sale price obtained for the flat, including the loan that had since been reallocated to the new flat, was used to purchase it. The new flat was used by the owner.
The Central Allowance Office for Retirement Assets, which is part of the German Federal Pension Insurance Fund, took the view that, following the reallocation of the loan to the second flat, the retirement assets were no longer being used for harmless residential purposes.The first-instance tax court (FG) took the same view.
However, the Federal Fiscal Court took a different view. It considered direct capital use to be given even if a loan was taken out for the purchase or construction of an eligible residential property and the loan was then reallocated to a subsequent property if this was also used for own purposes. Although this did not follow directly from the wording of the statutory provision, it did follow from the structure and meaning and purpose of the provision. The reduction in interest and repayment costs in old age was intended to enable those eligible for the allowance to acquire owner-occupied residential property. This was not precluded by the reallocation of loans for another apartment.
However, as the FG of first instance had not determined whether an effective debt restructuring and reallocation had taken place, the legal dispute was referred back to the FG for a new hearing and decision. Those affected should, however, seek tax advice before selling, repurchasing, restructuring or reallocating loans.
Source: Federal Fiscal Court, judgment of 27 November 2024 – Ref. X R 24/23