Riester policies are too expensive

D.he state-sponsored private pension does not only suffer from the low interest rates. It also carries a cost problem with it. This is made worse by the low interest rates. A study published on Thursday by the citizens’ movement Finanzwende shows the extent. According to the study, a quarter of all paid-in contributions and allowances flowed into the cost block of the provider and not into the return for savers. In every third policy examined, it was even more than 30 percent.

For the investigation Finanzwende examined 65 Riester policies from insurers. The data came from sample product information sheets of the providers according to the specifications of the Production Information Center for Pensions (PIA), which certifies offers on behalf of the state. It was assumed that a 37-year-old saver would pay 1200 euros including an allowance into the policy for the next 30 years. The authors criticize the high costs. “That is a multiple of the 10 percent that the federal government assumes in models,” says the study.

Because of the high costs and poor interest rates on fixed-income investments, the earnings prospects are poor. Riester products with a cost burden of less than 15 percent are, however, in some cases low in yield. “As a rule, the customer return after costs is then below 0.5 percent. In one case it is 0 percent, ”criticize the authors.

Projected effective return is below the rate of inflation

The 67 annuity insurances would have an average (forecast) effective return of 1.6 percent. That is below the average inflation rate of the past 30 years of 1.8 percent. However, one can counter the authors here that inflation is currently particularly low parallel to the low interest rates, so that the real return is currently positive again. How inflation will be by the end of the term cannot be predicted.

The German Insurance Association (GDV) responded promptly to the investigation. The financial transition representation does not show costs that are deducted from the contribution. Instead, various investment-related costs would be included – including fund costs that increase with performance. “Methodologically, the difference between theoretical savings capital without costs is compared with capital with costs (reduction in wealth method)”, said the deputy GDV managing director Peter Schwark of the F.A.Z. In this way “percentage moon values” would be generated. Long terms and high returns on investments would be distorted by this method. “Contrary to what has been suggested, the performance is not zero, but can reach very respectable heights.”

Since the beginning of this electoral period, the federal government has been trying to introduce a simple, inexpensive standard product in state-sponsored old-age provision that is intended to remedy the disadvantages of Riester (high costs, low returns due to the mandatory contribution guarantee). There are different interpretations here: The financial turnaround founded by the former Green finance politician Gerhard Schick, consumer advice centers and the Greens plead for a state capital collection point.

In contrast, industry associations from the financial services sector and parts of the Union parties are in favor of a competitive solution with a high proportion of private providers. Almost all stakeholders agree that the previous funding system with a retrospective review of the allowances paid does not make sense.

The authors of the financial turnaround study say: “The cost problem cannot be reformed away.” Insurers would have had two decades to improve their cost structure. That didn’t happen. A system change to a state-organized pension product could solve the problems. A saver who pays into the Swedish pension fund to the same extent as into the examined insurance policies, with an assumed performance of 5 percent in the year after 30 years, would receive a payout that is 16,600 euros higher.


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