Germany’s planned early start pension represents a “first step” towards closing the gender pension gap and ensuring equal long-term savings opportunities for boys and girls, according to the Deutsches Aktieninstitut (DAI).

The DAI emphasised that individuals who begin investing early in a broadly diversified portfolio of shares, equity funds, or equity exchange-traded funds can build long-term savings and prevent the risk of poverty in old age.

In particular, it highlighted that starting early with financial provision is “crucial” for women, who are disproportionately affected by pension gaps in old age.

DAI chief executive and member of the board, Henriette Peucker, noted that girls in particular stand to benefit most in the long term from starting to save for retirement early, as women on average earn less than men and often “take a back seat” professionally and financially for children or caring responsibilities.

“This is reflected in a pension gap. Those who understand early on how investing works and why long-term share savings are worthwhile will be more confident and successful in dealing with money later on,” Peucker said.

DAI welcomed the federal government’s early-start pension initiative, under which the state will contribute €10 per month to an individual, funded and privately organised account for every child in education starting at age six until age 18.

The funds will be invested in the capital market until retirement to harness long-term growth. The specific details of the scheme are still under political negotiation.

DAI said that this is a “great opportunity” for all sections of the population to reap the benefits, with equal opportunities for women and men.

“Financial independence begins with financial education and access to capital market investments. This should not depend on one's family background or gender,” Peucker said.

She added that a well-designed early-start pension could make all the difference, laying the foundation for sustainable retirement provision and introducing both boys and girls to wealth accumulation on an equal footing.

“Even if the German government lags far behind other countries with its plans, the early start pension can contribute to greater financial education,” she said.

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