Private old-age provision: insurers explain their citizen’s pension – economy

Sustainable, understandable and unbureaucratic, high-yield and yet safe, this is how the German insurers praise their new concept for old-age provision. And if everything were that simple, it would solve the hotly debated question of what private old-age provision should look like in Germany in the future. The federal government, on the other hand, is considering a publicly responsible fund in which insurers would no longer play a role.

The General Association of German Insurers (GDV) proposes introducing a so-called citizen’s pension for everyone. It should be cheaper and at the same time more profitable than the often criticized Riester pension. The SZ had already reported on the concept, and now the association has commented on its proposal in more detail for the first time.

Association President Norbert Rollinger said at the annual press conference: “We still believe that the Riester pension can be reformed, but we also have the offer for a new start in our luggage, the citizen’s pension.”

The model is a kind of slimmed-down version of the Riester pension. Unlike its predecessor, it is not only aimed at employees. Civil servants, the self-employed and the unemployed should also be able to make provisions using the concept. “There are no more system breaks with varied biographies,” said Rollinger, head of the Wiesbaden insurer R+V in his main job. With the offer, the association wants to appeal to low and middle earners who pay little tax.

50 cents more for every euro

Similar to the Riester pension, the citizen’s pension is to be subsidized by the state, but organized in a less complex manner. This should happen through a simplification of the allowance system. “For every euro that citizens invest, they get 50 cents from the state,” said Rollinger. The amount is to be capped at four percent of the contribution assessment limit for statutory pension insurance, which is currently EUR 7,300 a month in the old federal states and EUR 7,100 a month in the new federal states. “The maximum amount supported is currently just under 300 euros,” said the association’s president. In addition, there would be a subsidy of 146 euros.

The deposits should be tax-free, the benefits are taxed when they are paid out. The option of a partial payment at the beginning of retirement could allow for flexibility. In principle, however, the accumulated pension should be able to be paid out for life. The GDV believes that this can prevent poverty in old age.

However, the association shies away from the conflict with its own representatives, the banks and large distributors such as DVAG. He doesn’t want to tackle the high costs. The citizen’s pension is also to be sold a little online, but mainly through agents and brokers for correspondingly high commissions. Every year, German life insurers pay out around eight billion euros for acquisition costs in life insurance. They get that back from their customers, which is at the expense of returns.

Insurers want to reduce costs simply by standardizing the new model. “The standardization saves effort and consultation of the contracts, that’s efficient,” believes Rollinger. The new procedure is so simple that insurers can offer contracts much more cost-effectively.

Good for insurers, but not for customers?

The citizens’ movement Finanzwende sees it differently. “With the GDV pension, the insurers are providing a solution for themselves, but not for the citizens,” said Britta Langenberg, the association’s pension expert. “The core problem of the customers – the far too high costs – is not really addressed. The insurers have not done their homework here. Instead, they want to steer even more tax money into their own coffers in the future.”

2022 was not an easy year for insurers. It was marked by the war in Ukraine, rising prices, growing inflation and people’s greater concerns about the future. Across all lines, premium income fell by 0.7 percent to 224 billion euros. The reason was life insurance, in which contributions fell by six percent to 97.1 billion euros. Rollinger: “On the one hand, the normalization of interest rates is bringing more investment alternatives back into play for customers. On the other hand, the rise in the cost of living means that many people are putting less money aside for private old-age provision.”

Insurers expect growth of around three percent for 2023. In life insurance it will remain at around zero, in property insurance the GDV is hoping for growth of six percent. A large part of this is due to higher prices with which insurers react to inflation.

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