Frankfurt, Munich It is one of the most pressing questions after the federal elections: What will happen to old-age provision? There has been a consensus for years that the statutory pension will no longer be sufficient in the future. At the same time, the Riester pension is about to end as a state-sponsored, private pension scheme.
So a sustainable succession plan is needed. Representatives from politics, the insurance industry and consumer protection organizations discussed this at the Handelsblatt strategy meeting. The parties present very different proposals in their election manifestos. Some things are vaguely worded, a lot should remain wishful thinking.
“For the citizens, the general election is like a lucky bag,” says Peter Schwank, General Manager of the GDV industry association. Jörg Kukies, State Secretary in the Ministry of Finance, assumes, however, that the next legislative period will bring noticeable changes in pension provision. For undecided voters, here is an overview of the different positions of the parties:
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This is what the CDU / CSU suggest:
Statutory pension
According to the CDU / CSU, the statutory pension insurance (GRV) will remain a central pillar for most people. There should be a precautionary obligation for the self-employed, either in the GRV or in other insolvency-proof and access-protected types of provision. At the same time, however, the Bundestag member Peter Weiß emphasizes: “Consumers are well advised to put their old-age provision on at least two or even three legs.” That means: Company and private old-age provision will also remain important.
Employer-funded pension
The Christian Democrats also want to ensure that more people have a company pension. The party wants to improve the transfer of entitlements when changing jobs, and low-wage earners are to receive greater support.
Private retirement provision
The Union is promising a new start in private, but state-sponsored, old-age provision. The CDU member of the Bundestag Peter Weiß says: “We have to simplify the Riester pension, reduce bureaucracy, lower guarantees and offer broad investment opportunities.” The CDU therefore wants to develop a standard product without closing costs and with the lowest possible administrative costs. All employees should be included automatically, unless they actively decide against it (opt-out). There should be funding from the state as well as products with and without a performance guarantee.
This is what industry experts say
According to experts, the Union’s program is more evolution than revolution. In the future, a cheap standard product should prevent the Riester pension from being as rigid, complex, expensive and often also low-yield as it was before. Guido Bader, head of the Stuttgarter Versicherung, sees the CDU’s proposal as the difficulty of introducing a standard product without closing costs: “I don’t believe that such a product will be so standardized that it can do without advice.”
This is what the SPD proposes:
Statutory pension
The SPD wants to work for a good and reliable pension and has announced a permanent pension level of at least 48 percent. She refuses to raise the statutory retirement age.
Employer-funded pension
Significantly more employees should be covered by a company pension scheme.
Private retirement provision
The SPD has a standardized old-age provision product based on the Swedish model, which is offered by a public institution. It should be inexpensive, digital and cross-border. The promotion of new contracts in the form of grants should be limited to lower and middle income groups.
This is what industry experts say
According to the Swedish model, employees also have to pay 16 percent of their gross income into the statutory pension fund. In addition, there is a further 2.5 percent that is invested in funds on the capital market. Around 500 of them are available, but more than half of the citizens invest in the state fund AP7. It has generated double-digit returns in each of the past ten years, but has also made heavy losses in crisis years. The problem for the more security-oriented Germans with this model could be that up to the age of 55 they invest completely in stocks and only then gradually switch to fixed-income securities.
Schwank from the GDV warns that there is no time to develop completely new concepts: “The baby boomers will soon be retiring, so we need prompt solutions.” Bader from the Stuttgarter Versicherung, on the other hand, wonders why people believe that a state-organized product is better may be.
This is what the Greens propose:
Statutory pension
The Greens plan to develop the GRV into a citizens’ fund in which the self-employed and members of parliament are also included. Officials are to be added later.
Employer-funded pension
The Greens want to make it easier for small businesses to offer a company pension.
Private retirement provision
The Greens describe the Riester pension as a failure. Instead, they want to introduce a citizens’ fund here too, also with an opt-out solution for the deposit. The Bundestag member Wolfgang Strengmann-Kuhn from the Greens admits that there are still many questions unanswered – for example who should be responsible for the product and in which systems investments may be made.
This is what industry experts say
The envisaged citizens’ fund should be publicly administered and be inexpensive for citizens. However, there is no obligation to do so. The previous Riester pension is to be transferred there. Risks should be widely spread. The aim is a sustainable and long-term investment. Criticism comes from the BVI fund association: State fund solutions lead to distortion of competition and are a wrong path.
This is what the FDP suggests:
Statutory pension
With the share pension, the Liberals want to add a capital market component to the statutory pension. A smaller contribution of, for example, two percent of gross income should flow into a funded old-age provision that is managed independently as a fund. The FDP is in favor of a precautionary obligation for the self-employed, but demands freedom of choice between the systems.
Employer-funded pension
The FDP wants to give all companies the possibility of a pure contribution commitment, whereby a higher share of shares would be possible. The workforce should be automatically included – with an opt-out rule.
Private retirement provision
FDP man Frank Schäffler warns that the Riester pension must be reformed. The FDP advocates broader funding for private provision with a higher share of shares after the election.
This is what industry experts say
Above all, the Liberals are calling for broader forms of investment and higher equity quotas in old-age provision. Flexibility, greater personal responsibility, more opportunities, but also more risks would be the result. The FDP is giving the strongest impetus in the direction of a private-sector solution, says Bader from the Stuttgart life insurance company.
This is what the left suggests:
Statutory pension
For the left, the focus is on strengthening the GRV. It also relies on raising the pension level again to 53 percent and a minimum pension of 1,200 euros net per month.
Employer-funded pension
In future, company pension schemes are to be financed primarily by employers. The left is against exposing workers to the risks of the capital market.
Private retirement provision
The left sees an end for the Riester pension. Riester savers should be able to voluntarily transfer the capital they have saved up to the statutory pension insurance. In addition, private old-age provision should not be subsidized by the state: “We do not want private old-age provision to be promoted through allowances or that tax money be invested here,” emphasizes MP Matthias Birkwald.
This is what industry experts say
The Left, like the SPD and the Greens, want the fixation or an increase in the pension level. The party is also calling for the Riester pension to be abolished. Support comes from consumer advocates such as Axel Kleinlein from the Association of Insureds (BdV): “We have to stop investing a lot of money in bad products.” However, he calls for protection of the current status for savers who already have a Riester contract.
What should consumers do?
The controversial discussions make it clear that it will be some time before there will be a direction for the future direction of old-age provision under a new coalition. But many consumers cannot wait until then.
Because when it comes to old-age provision, the earlier investors start saving, the more money they will have at their disposal when they retire. Regardless of political changes, it is therefore important to start private pension provision at all – even if it is only to pay 50 euros per month into an ETF savings plan or a fund policy.
If consumers are dissatisfied with their existing Riester contract, consumer advocates advise to leave the contract on hold until further notice and to stop payments rather than terminate it immediately. Because in the event of termination, the state allowances have to be paid back, so in the end – depending on the term – relatively little money could be left over.
More: Low interest rates and inflation: challenges for life insurers are increasing.