Riester and Rürup savers need a lot of patience to fight inflation. If you want to achieve better returns than inflation with state-sponsored pension products, then you have to live to be at least 100 years old. This is the result of a study by the citizens’ movement Finanzwende.
The association, which, among other things, promotes consumer protection in the financial sector, examined a total of 22 Riester and 89 Rürup pension insurance policies that were available on the market in autumn 2023. Of these, only two Rürup products achieved a return of more than two percent. Not a single one of the Riester pension insurance companies managed to overcome this hurdle. “This is a dismal result,” says Britta Langenberg, head of consumer protection at Finanzwende. Currently, around 10.3 million Germans have a Riester pension insurance, and around 2.6 million have a Rürup policy.
The aim of the financial transition investigation was to measure the customer benefits of the Riester and Rürup contracts, said Langenberg. The financial regulator Bafin requires this for retirement provision products. To measure it, Finanzwende used the returns that the pension insurance policies achieve over the entire term – i.e. across the savings phase and the pension phase. A product is of reasonable benefit to customers if its average return is above inflation. “Customers expect at least a small adjustment for inflation in their private pension provision,” says Langenberg.
No benefit can be determined
The experts set an average inflation rate of two percent annually – the European Central Bank’s target value for inflation. However, even this rather modest benefit “could not be determined” in the Riester and Rürup products examined, says Axel Kleinlein. The actuary and former board spokesman for the Association of Insured Persons calculated the returns for Finanzwende. The providers’ product information sheets served as the basis for this. They are mandatory for Riester and Rürup products. Customers will find the costs of the contract and the guaranteed monthly pension benefits.
According to the calculations, the Riester contracts examined achieve returns of between minus 0.11 and plus 1.83 percent annually over the entire term. For Rürup contracts, the range is between 0.31 and 2.87 percent. The reason for the meager returns is, on the one hand, high costs in the savings phase for retirement assets. On the other hand, the Riester and Rürup providers made unfavorable assumptions about life expectancy during the retirement period.
Background: In order for the insured to get the amounts they have paid in, they usually have to live to a very old age. However, customers often die earlier. Since the assets saved at Riester and Rürup are generally not inheritable, the providers collect the remaining assets in the event of death. This significantly reduces the return on the contracts. Even if the return in the savings phase until retirement is still quite decent, “the retirement phase ruins the result,” says Britta Langenberg.
“Security comes at a high price.”
However, Finanzwende did not include in the calculations the state support that Riester and Rürup savers receive during the savings phase. The tax deduction during retirement is also not taken into account, says mathematician Kleinlein. But even if these two effects are taken into account, Riester and Rürup contracts apparently only rarely manage to compensate for inflation.
Experiences from the Bavarian Consumer Center’s retirement planning advice show that up to the age of 85, the products only achieve returns of more than one percent in exceptional cases. Riester and Rürup contracts therefore have “no appropriate customer benefit compared to savings contracts without support,” says Merten Larisch, pension expert at the consumer advice center. He also cites the high life expectancy that insurers use as a basis for their customers as reasons for this – and the obligatory, lifelong annuitization of the capital saved.
“The security of a lifelong pension comes at a high price for many people,” says financial transition expert Langenberg. It is therefore time “that we set clear requirements for state-sponsored pension contracts”. The focus should be more on the returns in the retirement phase. In their view, the Riester and Rürup pension system “cannot be saved”.
It remains to be seen how state-sponsored pension provision will continue in the future. The federal government wants to reform it this year if possible. The basis for this should be the proposals presented by a group of experts in 2023. Accordingly, the payment of the saved assets should become more flexible during retirement. However, what exactly this will look like is still unclear.