GERMANY - Fidelity's head of German institutional business has warned that Germans face an income drop of nearly half in retirement.

Klaus Mössle told IPE that measures taken so far are "not sufficient".

The Fidelity Pension and Retirement Index shows that though Germans expect 70% of their final salary as their income in retirement, they will receive only 56% due to a conservative approach to saving.

The index, which takes into account the various sources of retirement income, suggests that the total pension gap for Germans in employment is 44%

Mössle, managing director and head of institutional business at Fidelity's German office, said: "There is an urgent need for action - from the state, product providers and most of all individual Germans."

The distributions of assets is the keys issue, as the majority of Germans invest primarily in products geared to security, with only 19% of Germans in employment using products focused more on generating significant longer term returns.

"Households should better understand basics of the relationship between risk and return," and Germans need a better understanding of financial products, Mössle said.

Other problems are that Germans overestimate the provision situation and the fairly limited company pension provision landscape in Germany.

"In countries like Holland or Switzerland, company pension amount to 40% and 32% respectively, of average households' retirement income while in Germany the figure is still only around 5%," said Mössle.

Mössle, the former president of the now defunct European Asset Management Association, joined Fidelity in 2004 from Deutsche Asset Management.