This year the Riester pension celebrates its twentieth birthday.
But it is a sad anniversary, because in the indecision of the Union parties and the SPD, the necessary reforms in the subsidized old-age provision have been postponed.
And we expected the first providers to withdraw from the new business.
Editor in business, responsible for “People and Business”.
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On Thursday, the DWS asset management company, one of the largest providers of Riester contracts on the market, announced that it would no longer offer such fund contracts from January 1st.
On the other hand, it will continue to fulfill its existing obligations.
Sebastian Mentel, Head of Private Pension Provision and Asset Accumulation, justified the decision unequivocally with the delayed reform of the federal government: "We have really done everything to spread funded pension provision in Germany," he was quoted in a statement.
The federal government did not abolish the obligation to guarantee contributions
But because the black-yellow coalition, contrary to what it announced in the coalition agreement, did not abolish the obligation to provide a gross premium guarantee, customers' money can only be invested in unattractive investments.
"In our function as trustee for our customers, the failure to reform the Riester legislation unfortunately forces us not to accept any new contracts until they are changed," said Mentel.
With 665,000 existing customers, DWS is one of the major providers on the Riester market.
In the first few years, the model also did well because it was enough to invest part of the assets in more secure bonds in order to meet the guarantee.
However, the lower the capital market interest rate fell, the less the fund investment differed from the capital investment of an insurance company.
Riester contracts therefore hardly differ in their investment portfolios.
The apparent paradox has arisen that, because of the low interest rates, an ever larger part of capital had to be invested in unattractive fixed-income securities - and an ever smaller part in the productive capital of the economy.
But that was actually once the goal of the Riester reforms.
Providers can hardly invest in stocks for their pension customers
"There is no scope for high-opportunity and value-based equity investments," writes DWS in its press release. For six years she has been campaigning to overturn the mandatory gross contribution commitment. This stipulates that every euro paid in must at least be available again for retirement at the beginning of the retirement phase. Initially the fund companies, but later also the insurance companies that dominate the Riester market, have campaigned for a reform.
But even with the explicit promise to introduce simple, standardized old-age provision, the governing parties did not feel obliged to react to the low interest rate situation.
"The decision to stop new business is therefore necessary to protect the interests of future generations of investors," writes DWS.
Under the given circumstances, Riester can no longer be offered sensibly.
A number of insurers are likely to follow suit, because on January 1 the maximum actuarial interest rate in life insurance will fall to a level at which a premium guarantee without losses will be impossible.
The DWS reserves the right to examine the new sales stop as soon as a necessary reform by the legislator is on the way.