German Bundesrat votes on heating subsidy for low-income households

Low-income households in Germany are set to receive a one-off payment to help ease the burden of spiralling heating costs.

A woman turns up the thermostat in her home
A woman turns up the thermostat in her home. Photo: picture alliance/dpa | Hauke-Christian Dittrich

As the cost of energy continues to rise amid the war in Ukraine, Germany’s upper house of parliament is set to vote on plans to provide relief for housing benefits claimants and students. 

The proposals, which are expected to pass on Friday morning, will see one-person households receiving a one-time subsidy of €270.

A two-person household will receive a €350 allowance and there will be an extra €70 for each additional family member. Students and trainees who receive state aid are entitled to a one-time payment of €230.

Around two million people in Germany are set to benefit from the subsidy, which will cost the treasury around €370 million. 

Plans for the heating allowance were originally formulated in the wake of the energy crisis last year, but the timeline for introducing the subsidy was scuppered by the start of the Ukraine war on February 24th.

With fears of energy shortages and soaring prices rising in the wake of the Russian invasion, the traffic-light coalition went back to the drawing board to double the amount that housing benefit recipients would receive this year. 

This is in addition to a further energy package that includes a €9 monthly transport ticket, a €300 lump-sum for taxpayers, a tax cut on fuel and a ‘Kinderbonus’ for families with children.


Gas targets

The agenda of the Bundesrat includes several other items related to the Russian attack on Ukraine, including specifications for the refilling of gas storage facilities.

To help avert an energy supply crisis, the amendment to the Energy Industry Act provides deadlines for filling up Germany’s gas stores.

If the amendments pass as they are expected to, Germany will have to fill its storage facilities to 80 percent capacity by October 1st and to 90 percent by November 1st. After next winter, the government aims to keep emergency reserves of at least 40 percent.

According to current figures, gas storage facilities are currently only around 25 percent full.

By stocking up on gas now, the government also hopes to shield consumers from dramatic price rises in the future.

READ ALSO: What would happen if Germany stopped accepting Russian gas?

€100bn for the militiary

Germany’s struggling military is also set to get a shot in the arm with a one-off €100bn fund to replenish stocks and buy state-of-the-art military equipment. 

The traffic-light coalition wants to anchor the borrowing for the massive military investment in the German constitution (Grundgesetz), which the federal states will first have to take a position on.

Should the amendment to the Grundgesetz pass in the Bundestag, it will have to be approved by the Bundesrat – again with a two-thirds majority.

The house will also look at tax relief proposals and a bill to raise the minimum wage to €12 per hour on Friday.

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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