Extra pension: State-organized fund savings | BRIGITTE.de

Sometimes in life you really have to be forced to be happy. We don't like to admit that, of course. We don't like it when decisions are made over our heads. But here and there it turns out in retrospect that that might not have been wrong after all. This realization is currently spreading among many people who are concerned with our retirement provision. And with the "Law to Reform the Statutory Pension Insurance and Promote Funded Pension Assets", better known under the name "Riester pension", which came into force in 2002. Reform was necessary, because even then it was clear that we would

1. everyone is getting older and will continue to receive a pension for longer,

2. the elderly are becoming more and more (in a few years also the cohorts with the highest birth rates will retire), while

3. Much fewer young people come to pay the older people's pensions with their contributions.

The future has to be planned

This pay-as-you-go system worked in the 1960s, when there were six contributors for every person who retired; now the ratio is almost two to one. For years the law was calculated, negotiated and readjusted. Namesake Walter Riester, at that time labor minister in the red-green coalition, had actually imagined it to be completely different: as an obligation for all employees to make private provisions for old age. But that hit the headlines: "That too! Riester plans compulsory pension" ("Bild" newspaper), and the obligation was quickly deleted from the draft law. It remained a voluntary solution, nobody should be forced.

And today we have the dilemma. The returns on the Riester pension are too low, the fees too high, the rules confusing. More than 16 million contracts have been signed, which sounds great. But: only half of those entitled actually receive the full allowance, every fifth contract is suspended. Those who actually need it most urgently in order not to end up in old-age poverty are the least likely to be riots: almost every second person with a gross income of up to 2500 euros a month has no contract at all. "Although more than two billion euros in taxpayers' money is paid every year for the state Riester allowances, many people still do not get a sufficient supplementary pension," says Dorothea Mohn, financial expert at the Federation of German Consumer Organizations (vzbz).

Her association and the CDU-affiliated Konrad Adenauer Foundation have put together everything that goes wrong: With the Riester pension insurance – of which there are ten million contracts – the running costs are sometimes three percent, which eats up a large part of the return . The products of insurance companies, banks and building societies are so complicated that many do not even dare to go without advice. But the consultants are often insurance intermediaries who, of course, want to see commissions. And these are, in turn, factored into the contracts, i.e. not transparent. "Above all, the insurance industry made great profits from the Riester pension," said Mohn.

It works in other countries too

Well, we could have done better. If we had been gently and skillfully forced to our happiness. The others do it too: Other countries invest part of their pension contributions in investment funds, state-organized and automated, with low costs and no commissions. The Deutsche Aktieninstitut (DAI) has put together examples in a current study: For example, if Ally retires in Australia …

… on the one hand she receives the state pension as basic security and on top of that the company pension scheme: Since 1992 all companies have been obliged to pay contributions into funds for their employees (they will increase slowly to twelve percent of gross income by 2025). Ally was able to choose from around 200 so-called superannuation funds. She received state surcharges for additional voluntary contributions. After deducting fees and taxes, the Australian super funds achieve an average of 5.9 percent return per year.

… or Stina in Sweden … The Swedish pension system is often touted as a role model by experts. The special feature: Even the statutory pension insurance relies on shares, 2.5 percent of gross income goes into funds. Stina could choose from more than 800. But she didn't want to deal with it – and that now applies to most insured persons – so her contributions are automatically invested in the state standard fund AP7 Såfa. It's been around since 2000, consists of 92 percent shares and had an annual return of nine percent from 2002 to 2017.

… or Gloria in Great Britain In addition to the statutory pension, Gloria has a company fund savings plan – like 84 percent of the employees. This high rate was achieved with the so-called optout. That means: You automatically take part if you don't expressly object. And very few do that. Using the convenience of people – also a way of forcing them to be happy.

It's best to just do it yourself

Not only the DAI, but also consumer advocates and politicians, from the CDU to the Greens, is calling for more pension provision with shares. The idea of ​​the Federation of German Consumer Organizations is called "Extra pension": a state-organized standard product. Those who do not object by opting out automatically pay into funds through the employer. The costs should amount to a maximum of 0.3 percent of the investment funds." With an investment of the funds directly on the capital market, without profit interests of an insurance company or bank, many people could build up a good supplementary pension, "said Dorothea Mohn. According to a survey by the vzbv, 73 percent of Germans would like such a model. At its party congress in November, the CDU decided not to have a standard product, but merely that the state should meet appropriate criteria for private old-age provision. If that does not show any success after three years, then a state-organized standard product would come. "These product criteria cannot solve the problem. Unfortunately, valuable years would only be lost again, "says Mohn.

And now? Doing nothing is not an option either. One solution that the consumer advocate would also sign is: do it yourself. We can all provide for old age privately with a fund savings plan and learn a lot from the successful models in other countries. We open a custody account for this purpose (free of charge from online brokers such as onvista, DKB, comdirect or Consorsbank). For example, we pack in a "slipper portfolio", as Stiftung Warentest calls it. It is called that because you can lean back comfortably afterwards, and consists of equity funds (building block for the return) and government bonds (the security building block). We pay the lowest fees with an ETF (Exchange Traded Fund), i.e. a fund that simply tracks an index. It should span many companies, countries, and industries in order to spread the risk. At MSCI World, for example, there are around 1,600 stocks from 23 industrialized countries. Now conclude a savings plan (from 25 euros a month) on this ETF and: let it run. Ten years, 20, 30, longer. The completely private one is ready Extra pension. Almost like in Australia.

Old-age pension with shares: just courage!

Knowledge 1

Stocks are only a risky investment when you are in a hurry. But if you have many years to spare, it would be rather risky NOT to invest in stocks. That is why the governments of many countries also rely on equity funds to provide their citizens with good old-age provision.

Knowledge 2

The costs are the be-all and end-all. The lower the fees (also: the fewer people involved in you want to earn), the higher your income. If, as before with Riester, you want to have your paid-in capital paid out again, this will reduce your return. The countries mentioned do not give such a guarantee. You rely on the fact that price fluctuations will even out themselves in the long run.

Knowledge 3

It may be that, at the beginning of your retirement, of all times, stock prices are in the basement. You can get over that if you switch a few years in advance, i.e. reduce the share portion; and if you only pay out the respective monthly amount and have the rest of the money invested. Because the prices will rise again.

Would you like to read more about the topic and exchange ideas with other women? Then take a look at the BRIGITTE community's "Investment Forum"!

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