GERMANY - Demand for the ‘Riester-Rente', a government-subsidised private pension launched in 2002, surged again in the second quarter, pushing the total number of contracts to almost 7m, the government has reported.
According to the ministry for labour and social affairs, 568,000 Riester contracts were sold in the second quarter, or about the same amount as in the first. All told, 6.8m Riester pensions have been sold since 2002, representing an underlying volume of €6.4bn.
"The almost linear growth in demand for the pensions in the second quarter was even more noteworthy considering that in past years, the growth for that quarter was significantly below that for the first," the ministry said.
Demand for the Riester pension has been surging since early 2005 when government improvements to it took effect. The improvements included greater portability, simplified criteria for subsidies and less restrictions on monthly contributions.
The ministry also said around 70% of the Riester contracts sold in the second quarter were of the private insurance type with the remainder fund-type. Among the asset managers in Germany offering fund-type Riester contracts, Union Investment is currently the leader, having sold 700,000 contracts.
While demand for the Riester pension has been robust, the product has only achieved 22.6% of its total market potential, given that Germany's 30m salaried employees are eligible for it.
To further boost demand for it, the government will from January 1 2007 permit Riester pension holders to withdraw savings for the purchase of property. From January 1 2008, Riester pension holders will also get a tax break equalling €300 for every child born after that date.
The government calculates that since its launch on January 1 2002, it has provided more than €1bn in subsidies for the Riester pension.