Aon expects that life insurers and providers of pension products will cease to offer full guarantees on saved capital to members, a development in line with current market trends.

“We expect that in the future there will be no offering of rates that includes a 100% guarantee on contributions,” said Thorsten Teichmann, partner and member of the management board at Aon.

A reduction of the guarantees means that employers will face challenges when offering occupational pensions to employees, he added.

André Geilenkothen, partner and member of the management board at Aon, said “politicians must allow more flexibility and lower guarantees” to give insurers, Pensionskassen and Pensionsfonds the opportunity to opt for “more profitable forms of investments”.

Geilenkothen warned that, otherwise, company pension schemes will become passive managers of fixed-term deposits instead of actively looking to generate returns.

Aon specifically mentioned Riester-Rente contracts as no longer being feasible if politicians did not do more to support a move away from guarantees.

Coalition against guarantees

Aon has joined organisations such as the German Institute of Pension Actuaries (IVS), and the supervisory authority BaFin, demanding to cut guarantees while simultaneously freeing up room for investments on pension assets.

In March the German finance ministry moved to reduce the maximum interest rate guaranteed on life insurance and pension products from the current 0.9% to 0.25% in 2022 in order to support the long-term stability of life insurers in the interests of the insured. It published the relevant legal text after having confirmed its plan to IPE.

The draft specifies that the reduction of the maximum interest rate applies also to Pensionsfonds.

However, Aon noted, insurers already use an interest rate on saved capital below the maximum 0.9%. Insurers apply an interest rate even below the planned 0.25%, the consultancy said.

Read more on pensions in Germany in our country report in the April magazine

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