A reform of old-age provision in Germany is becoming increasingly urgent due to the unfavorable demographic development.

But instead of reforming the Riester pension, which has been established for 20 years, some authors, also of scientific provenance, propose to abolish two systems at once: that of commission brokerage and the Riester pension.

On the other hand, it should first be noted that with commission-based sales, low earners can also afford qualified advice that is initially free of charge.

This would most likely not be used due to the dissuasively high hourly fees of the fee-based consultants of 120 euros and up.

In this case, customers would either do without advice on their private pension schemes altogether, or else they would conclude any contracts themselves in the blind flight and only realize after years or in the event of damage that these are inappropriate or insufficient.

Critics of commission brokerage also have to ask themselves why, despite repeated incantations on the part of politicians, fee-based advice is hardly widespread and is not accepted by customers.

After all, there are just 325 insurance consultants in Germany, with around 193,000 insurance brokers.

Fatal consequences threaten

That's why we as the Federal Association of German Insurance Merchants (BVK) read the development in Germany with its commission-based remuneration system in a completely different way: It is precisely with this that people in Germany are making provisions for old age, with more than 16 million Riester contracts, and even in 2021, in the second year of the Corona Pandemic, Riester new business increased significantly by twelve percent to 310,500 new contracts, as the General Association of the German Insurance Industry (GDV) recently published.

Life insurers, pension funds and pension funds also had a good 87 million contracts in their portfolio at the end of 2021, around 900,000 more than a year earlier, according to the GDV.

This impressive sum came about thanks to the prevailing commission system and will help prevent poverty in old age for those who have made additional provisions.

And that with extremely low customer complaint rates: In 2020, just 298 policyholders complained about brokers to the recognized arbitration board of the insurance ombudsman, and that with more than 454 million mediated insurance contracts.

The complaint rate was also slightly different in previous years.

Conversely, one can assume that the majority of people are extremely satisfied with the commission system.

A recently published study by the well-known business consulting company KPMG entitled "Future of Consulting" comes to the conclusion that a commission ban would exclude broad sections of the population from financial consulting.

Another result of the study is that most consumers (74 percent) are not willing to pay for fee-based advice.

Another KMPG study, "Retirement Management in Transition", found that the German insurance industry in particular, with its proven sales force, has far from exhausted the potential for this area and that there is great potential here.

In addition, our assessment of the preservation of the commission system is also covered by the developments in the Netherlands and Great Britain.

Appropriate detoxification

So it can be said: Without the commission-based advisory work, millions of construction financings would not have taken place, hundreds of thousands of financings in the small and medium-sized sector would not have been carried out and ultimately millions would not have the old-age provision that makes them the wealthiest generation of pensioners of all time in Germany today.

In this way, the insurance intermediaries in particular have been fulfilling an important socio-political task, conscientiously, qualified and competently for years and days.

Abolishing this successful system would be tantamount to a declaration of bankruptcy with unforeseeable consequences for state and society.

Speaking of the state: It should be borne in mind here that the financing risks involved in setting up a sovereign wealth fund are high and that it will no longer be of any use to the baby boomer generation retiring in this decade.

Setting up a sovereign wealth fund based on the Swedish model would also not be a solution, since it is well known that the state is not the better entrepreneur.

It should also be borne in mind that Sweden, with a population of around ten million, has a higher birth rate, which means there is less pressure on the pay-as-you-go state pension.

A sovereign wealth fund for a smaller population is also easier to set up than one for more than 80 million Germans.

Therefore, the 10 billion euros in start-up capital for the German sovereign wealth fund envisaged by the traffic light coalition will only be the famous drop in the ocean.

But on the point of information overload, we have to agree with the critics of commission advice.

Due to a misunderstood interest in consumer protection, more and more information obligations were imposed on intermediaries and product providers, which hardly any customer can see and perceive anymore.

Therefore, an appropriate detoxification should take place here - by the way, as with the Riester pension - so that the tried-and-tested placement system can act even more effectively.

Michael H. Heinz, President of the Federal Association of German Insurance Merchants