The federal government wants to comprehensively reform state-subsidized old-age provision and thus encourage more people to save privately for old age. The Riester pension is to be simplified and expanded, the offers for private provision contracts are to be made clearer, management fees are to be reduced and possible risks, such as fluctuations in stock market prices, are to be accepted to a greater extent. This is the result of the “Focus Group on Private Old-Age Provision”, which presented its recommendations on Monday. The group includes experts from ministries, associations, trade unions and business, with the FDP-led Federal Ministry of Finance taking the lead. “We are very confident that we will promote competition in the old-age provision market,” said Florian Toncar (FDP), the responsible parliamentary state secretary. “We also want to make switching providers easier.”
The state-subsidized old-age provision in the form of the Riester pension has long been criticized, in particular because of the meager interest rates and the often high administrative costs. In addition, according to the General Association of the German Insurance Industry (GDV), fewer citizens made private provisions for old age in view of the high inflation last year, and new business with Riester pensions fell by 60 percent.
Nevertheless, the experts recommend sticking to the Riester model. It is about reaching people with low incomes, young people and parents of children or young adults in education. In principle, this is already possible today, said Toncar. “We have an above-average number of women who benefit from today’s Riester promotion.” Now the main focus is on simplifying bureaucracy and strengthening existing instruments such as the career starter bonus. The aim is to create more incentives for young people in particular to save “early and continuously”.
The core of the recommendations is the simplification and standardization of existing products. An example of the model that is difficult to understand is the “income-dependent minimum own contribution calculation”. The monstrous word stands for the minimum amount that you have to pay into your Riester contract, depending on your income. This should be simplified in the future, which should also reduce administrative costs.
The Riester contracts are also to be expanded. In the future, there should be variants that accept more risk. So far, providers have had to guarantee that retirees will later receive at least their paid-in contributions plus government subsidies. This reduces the chances of a return because the providers have to invest accordingly cautiously. According to Toncar, interested parties should be able to compare the different variants and the respective costs on one platform. In this way, customers should be able to benefit from the competition. The majority of experts rejected a state-organized offer in the form of a fund.
Criticism of the results came from the Federal Association of Consumers (VZBV). With funds, it makes sense to take more risks, said Dorothea Mohn, head of the financial market team at the Federal Association of Consumer Organizations and a member of the committee. But not with other insurance offers, where, according to recommendations, only 80 percent of the contributions would have to be guaranteed. “This is harmful to consumers because it ensures neither higher returns nor lower costs,” said Mohn der Süddeutsche Zeitung.
Better clarity with the help of a platform on the Internet is not enough, because people usually trust their advisor when concluding pension contracts. “The more expensive products are consistently sold because they get the most commission,” said Mohn. She calls for a state offer for private old-age provision because this can achieve low costs. “The only thing that would really help is a public accountable fund.”
The traffic light coalition had agreed in the coalition agreement to “fundamentally” reform private old-age provision and to examine a publicly responsible fund with an “effective and inexpensive offer”. In addition, one will check whether one recognizes investment products with a higher return than Riester contracts.
I am not supposed to change anything for those who are already insured with the proposals that have now been made. One does not want, cannot and will not change contracts unilaterally, said Toncar. “Contracts that exist remain valid.” According to Toncar, the reform should result in a law in the coming year.