Berlin.
The government wants to reform private pension schemes. Consumer advocates propose public funds. Those are the benefits.
The payments from the statutory pension are not sufficient for most people in Germany to maintain their standard of living in retirement. In addition, not everyone gets a company pension from their employer. The state-sponsored retirement provision, such as the Riester pension, is another important mainstay. However, their attractiveness is diminishing in view of low yields. The federal government is therefore planning a fundamental reform of private old-age provision.
By the summer, a so-called “private old-age provision focus group” is to examine two alternatives: The introduction of a publicly responsible one pension fund and the legal recognition of private investment products with higher returns than Riester. At the same time there should be a grandfathering for current Riester contracts. The committee, which will meet for the first time on Tuesday under the chairmanship of the Federal Ministry of Finance, consists of representatives of the parties, ministries, science and fund providers, insurers, trade unions, employers and consumer protection groups.
Top consumer advocate Pop on the pension: “Riester has failed”
the Federation of Consumers (vzbv), who is represented in the group, is hoping for far-reaching changes in the system. “Riester failed. We no longer need to discuss this for months in a commission of experts,” says vzbv board member Ramona Pop of this editorial office. Read about this: Discontinued model Riester pension – for whom it makes sense
A real restart of private pensions is necessary in this legislative period. “In order for the focus group to produce real results and not just test orders, the traffic light must clearly commit itself to the necessary fundamental reform of supplementary pension provision and the introduction of a pension fund,” said the top consumer advocate.
According to the assessment of the consumer advice centers, a publicly responsible pension fund is clearly superior to private offers such as Riester. A report by the economic research institute ZEW Mannheim on behalf of the vzbv from 2019 has already shown that a broadly diversified, long-term investment in shares is high pensions possible with little risk. According to this, a pure equity strategy brings on average a return that is around three times as high as a risk-free investment in bonds. Also read the comment: Retirement age – The gap in Europe is unfair
According to estimates by the consumer advice centers, a pension fund could provide additional pensions in the order of the statutory retirement pension achieve. “The average monthly withdrawal of a statistical corner pensioner would be 1,870 euros, an average monthly pension around 1500 euros.”
Provident fund as an annuity: There are no longer any commissions
European countries such as Sweden or Great Britain are role models for stock pensions. For years they have shown that such a model works for savers. At the same time, the money does not primarily end up in the pockets of the financial sector. For years, the consumer centers have been promoting the Riester pension through a publicly responsible person provident fund to replace and at the same time to improve the social balance through the statutory pension.
The idea: Consumers could be automatically included in the provident fund via the employer, but would not have to pay any commission for this. There is also no difficult product selection, since the fund would automatically choose the right investment risk depending on age. The fund should too officials and self-employed are open. At the same time, anyone can refuse to participate. The fund will be organized by a public body. Also interesting: Shares for old-age security – that’s what the coalition is planning
It is important that the federal government must address itself to the private pension scheme get rid of insurance. “Insurance sounds like security,” explains Pop. “But retirement provision is about wealth accumulation.”
Wealth accumulation and risk protection cannot be bundled in one contract in a sensible way. insurances are also unnecessarily expensive and opaque due to commissions. In addition, they prevented proper capital gains. “The insurance shell guarantees insurers in particular a healthy income. That has to end. Because in the end all the arguments speak in favor of a public, capital-covered pension fund,” Pop is convinced.
Retirement provision: The Riester pension has many problems
the Riester pension has “a lot of problems” from the point of view of the consumer advocate. One of them is the so-called allowance subsidy. “First of all, the allowance is often not a subsidy at all, because the pension has to be taxed later. Secondly, promoting consumers with low incomes makes no sense from a socio-political point of view. Those who have little money usually have no money for pension provision and therefore need better protection through the statutory pension.”
The consumer center is also calling on the federal government to implement an overarching pension reform to tackle. There should be a stronger division of tasks between the three pension pillars: the statutory pension insurance (GRV) can focus more on social balance and better protection for workers – for example through higher disability pensions.
A newly established private provision should meanwhile focus on the Wealth Building to supplement the statutory pension for old age. Whether company pension schemes can also help depends on a reform of company deferred compensation. In general, Pop trusts that the focus group can come up with good recommendations. “History has shown that government commissions can lead to good outcomes for consumers. I’m thinking of the Data Ethics Commission or the Future Commission on Agriculture.”
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