German government to pass heating allowance law ‘by March’

In light of rising energy costs, the German government has pledged to bring in legislation to support low-income households with their energy bills by March.

A gas meter in a German household
A gas meter in a German household. Photo: picture alliance/dpa/dpa-Zentralbild | Jan Woitas

The traffic light coalition – made up of the Social Democrats (SPD), Greens and Free Democrats (FDP) – wants to introduce a new heating allowance for housing benefit recipients by March.

“Legal details are still being clarified, but the heating allowance will definitely be introduced in this quarter,” FDP housing policy expert Daniel Föst told the Augsburger Allgemeine on Monday.

“Time is pressing,” Föst said. “It should be decided on as early as February or in the first week of March.”

Energy bills in Germany rose steeply last year amid issues in the supply of natural gas and rising wholesale prices, with some families paying hundreds of euros more per year at the end of 2021 than the year before.

READ ALSO: Why households in Germany face even higher electricity bills

The government has already slashed the Renewable Energy Act (EEG) surcharge by more than 40 percent and plans to scrap it entirely by January 2023 in an attempt to ease the burden of additional energy taxes on households.

But a recent survey by price comparison site Verifox found that these savings hadn’t been passed onto customers by the energy providers. Instead, a 35 cents per kilowatt hour in January, electricity prices were higher than ever before.

“The extreme increase in energy costs is burdening many households,” Föst said. “We are therefore working on many issues at the same time. However, there is no perfect solution at the push of a button.”

According to an initial bill by Construction Minister Klara Geywitz (SPD), low-income households living alone should receive a subsidy of €135 in summer to help with their energy costs. For two-person households, a subsidy of €175 is planned, rising by €35 for each additional housemate. The definition of ‘low-income’ includes anyone who’s received housing benefit for at least a month prior.

In the Green Party, however, disagreements have arisen over how to support low-income households quickly.

Ricarda Lang, who has just been elected party leader, told the Rheinische Post that she wanted income raised by the CO₂ tax to go directly to lower-income households to be used as an energy allowance. 

However, Green Party parliamentary chair Katharina Dröge said other measures were needed in the short term to respond to high energy prices.

READ ALSO: Should Germany do more to support households with rising energy costs?

“These include the heating cost supplement for housing benefit recipients, an immediate supplement for families with low incomes and a fairer distribution of the CO₂ tax on heating costs between tenants and landlords,” she explained.

The coalition is also discussing bringing forward the abolition of the EEG levy – a tax that is added to energy bills to fund renewable energy sources.

“We are currently examining whether and when this is possible,” she said. 

Useful vocabulary 

Heating cost allowance – (der) Heizkostenzuschuss

to relieve – entlasten

housing benefit recipients – (die) Wohngeldempfänger 

disunity / disagreement – (die) Uneinigkeit 

We’re aiming to help our readers improve their German by translating vocabulary from some of our news stories. Did you find this article useful? Let us know.

Member comments

  1. Why is it that governments only seeming role in Germany is to identify ways of taking money from those that earn it and distribute it to low income brackets and government employees? when one realizes this type of normalizing doesn’t support innovation and growth, maybe some will still be left in German to enjoy it.

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Why German bank customers could soon pay less for their account

A major German bank is set to scrap fees on large balances - and a number of others look set to follow. Here's why people in Germany may be paying less for their savings or current account in the near future.

Why German bank customers could soon pay less for their account

What’s going on? 

Interest rates have been at rock-bottom levels for years, making it much harder for people to get returns on their savings.

In recent years, many banks have even been levying what’s known as negative interest rates on customers. If interest normally incentivises people to save by helping them to grow their money, negative interest basically does the opposite.

If you have a certain amount of money in the bank, your bank will charge you negative interest via a deposit holding fee, which will usually be a certain percentage of your balance.

With N26, for example, balances of over €50,000 are subject to a 0.5 percent fee each year. For a balance of exactly €50,000, that equates to €250 in bank charges just for keeping your money there. 

Some banks even charge a deposit holding fee for balances as low as €5,000 or €10,000 in a current account. 

On Tuesday, ING Deutschland became the first bank to announce that it would be scrapping negative interest rates for the vast majority of its customers.

From July 1st, new customers of ING will be able to deposit up to €500,000 in their account without being charged for it, while existing customers will automatically have the fee-free amount raised to €500,000 from the current €50,000. 

Now, it seems a number of other German banks are planning similar moves. 

Why is ING Deutschland ending the holding fee?

Not entirely out of the goodness of its own heart – though that doesn’t stop it being good news for customers.

The European Central Bank (ECB) is set to make a decision on interest rates in the bloc this July, and most people expect that the bank is poised to increase interest rates from minus 0.5 percent to zero. 

Since banks have basically been passing on the ECB’s fees to their own customers, a hike in the ECB’s interest rate would spell the end of most negative interest-rate accounts in any case. But ING Deutschland said it wanted to pass on the positive interest rate trend to its customers even earlier.

READ ALSO: EXPLAINED: How to save money on your taxes in Germany

“With the increase in the fee-free allowance for credit balances on the current and extra accounts, the deposit fee is no longer applicable for 99.9 percent of our customers,” said Nick Jue, chief executive officer of ING in Germany. “We were one of the last banks to introduce a deposit holding fee and one of the first to virtually abolish it.”

He added that the bank had already kept its promise to abolish the holding fee for almost all customers before the European Central Bank made its decision.

Does this have anything to do with that court decision on bank charges?

That’s definitely a factor. According to a decision in Germany’s Federal Supreme Court last year, credit institutions have to obtain the consent of their customers when making changes to their fees and conditions.

That means that financial institutions have to ask for consent to current fees retrospectively if they don’t want hoards of people trying to claim their money back.

If a customer doesn’t consent to the fees, the bank will usually close that customer’s account.

Man signs a contract

A man in a suit fills in an official form. Photo: picture alliance/dpa/Pixabay | hnw-Gruppe

According to ING Deutschland, the scrapping of negative interest rates on balances up to €500,000 may help to sway those customers who have not yet agreed to the latest terms and conditions – including the deposit holding fee.

Anyone who agrees to the Ts&Cs will automatically be given the higher allowance as of July 1st.

“ING Deutschland expects that the increase in the allowances will convince in particular those customers who have not yet agreed to the General Terms and Conditions including the holding fee, and that the bank will thus terminate fewer customers than last planned,” ING said in a press release. 


What other banks are planning to do this?

According to reports in Bild and Bialo, the other banks planning on ending negative interest rates (or raising the threshold for fee-free balances like ING Deutschland has done) include:

  • Deutsche Bank
  • Commerzbank
  • Deutsche Apotheker- und Ärztebank (Apobank)
  • Dortmunder Volksbank
  • Hamburger Sparkasse (Haspa
  • Frankfurter Sparkasse
  • Frankfurter Volksbank
  • Mittelbrandenburgische Sparkasse
  • Nassauische Sparkasse (Naspa)
  • Ostsächsische Sparkasse Dresden
  • Sparda-Bank München
  • Sparda-Bank Südwest
  • Sparda-Bank West
  • Sparkasse Hannover
  • Sparkasse Pforzheim Calw
  • Volksbank Stuttgart

What does this mean for my savings?

There’s good news and bad news.

The good news is that, from July, you’ll no longer have to pay exorbitant charges just to store your money in a safe place – and you won’t be penalised for saving more. The bad news, on the other hand, is that low interest rates aren’t going away anytime soon.

So while you won’t be losing money hand over fist, you won’t be earning much of a return on your savings either.

Banks in Frankfurt

Skyscrapers in the financial district of Frankfurt am Main. Photo: picture alliance/dpa/dpa-Zentralbild | Fernando Gutierrez-Juarez

“If the interest rate environment continues to develop positively, we will also let our customers participate in this development,” said ING Deutschland’s Nick Jue. “However, the low-interest phase will continue for the time being and broadly diversified investments will remain important.”

Getting a securities account where your money is invested is one way to try and grow your savings, as is investing in property.

Of course, people with mortgages and other loans benefit from the low interest rates – which could be why the German property market is currently booming. 

READ ALSO: Five ways Germany’s soaring inflation could affect your life