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Friday 02 October 2020
By Axel Witte
The Riester pension faces some reservations. The corresponding cautious contracts are used. To change this, politicians have some new ideas. Consumer advocates are not enthusiastic.
The state-subsidized private old-age provision was launched in 2002. To compensate for the reduction of the statutory pension level from 70 to 67 percent decided by the then red-green federal government. Critics see and saw in him something of a gift from politics to the banking and insurance industry.
What is one of the main points of criticism. The corresponding products are simply too expensive and simply cost too much in terms of commissions and administration. This reduces returns for savers, and instead enriches banks and insurance companies. In addition, the lack of flexibility of the products, due to a limited risk by the state, reduces the potential for returns. The effort and requirements that must be made to benefit from state funding are also perceived as too high. Not surprisingly, far fewer citizens than expected are using the pension product. There are now more than 16 million Riester contracts, but many of them are not fulfilled due to the reasons mentioned and are inactive. An additional provision for private retirement is necessary so as not to starve later.
Old wine in new bottles?
The problem is known to everyone involved. Even with the CDU / CSU parliamentary group. And the Riester pension wants to make it more attractive to citizens with a new concept. According to their own statements, the newspaper “Bild” has a corresponding newspaper of the parliamentary group of the Union. The most important changes, including an assessment by the editorial team of ntv.de, are:
- The federal government should generally add 40 cents for every euro saved. It is not yet clear whether there should be additional funding. So far, savers have received the basic allowance of 175 euros, a possible allowance for children of up to 300 euros per child and also a tax credit. The more generous you are, the more you pay in the contract and the more the saver earns taxes. This is another central point of criticism of the product, because high and high income people in particular benefit from the tax advantage.
- The effort should be less for consumers, therefore less bureaucracy. The tax office should take care of the slow calculation of allocations. The supplier always does it on demand and, for once, for free. In addition, it is always possible to submit an application for permanent assignment to a bank or insurance company. But this is especially valuable for those who continue to pay the maximum fee (currently 2,100 euros including allowances, without tax benefits) in their contract.
- “All taxpayers” should have the right to riest. Until now, this has only been reserved for those taxpayers who also contribute to the mandatory pension insurance. This leaves out the majority of the self-employed and all public officials. This should be seen as an attempt by politicians to avoid the legal pension reforms that have been requested.
- The Riester pension, named after its inventor, former SPD Labor Minister Walter Riester, will become the “allocation pension”. Above all, an image gain should be promised here. Also, the CDU / CSU parliamentary group is likely willing to remove the name link between the product and a former minister of the political competitor. Regardless of this, the reform will be implemented in the current legislative period, according to the daily “Bild”, the approval of the SPD is considered safe in union circles.
Final score: The general increase in funding, and therefore also for low-wage workers, should be welcomed. And expanding the pool of people who have access to state-subsidized private pension plans could also be of interest to the individual. However, high costs and return restrictions for the saver persisted.
There are numerous concepts and role models for how things could go better, but so far these have been successfully prevented primarily by the insurance industry. Klaus Müller, a board member of the Federation of German Consumer Organizations (vzbv), describes the planned reform as a “gift to the financial lobby.” Instead, the Riester pension needs a full fresh start.
Regardless of that, it probably wouldn’t hurt to think about some basic thoughts about the legal pension. Because if that were more generous to citizens, the aforementioned considerations about the Riester pension could have been settled.
