Institute blasts failure of German Riester reform
GERMANY – “The Riester reform has failed” and “Germans must save more” – this is the message from the German Institute for Retirement Provision.
According to a study by the Deutschen Instituts fuer Altersvorsorge (DIA) presented at a conference yesterday, German citizens must put away more than 1,200 euros a year into personal retirement provision if they do not want to face considerable adjustments to their lifestyle when they retire.
To achieve a pension of 70% of salary, those born in the 1950s should be saving six percent and those born in the 1960s should be saving five percent of their gross salary. If savings behaviour does not change soon, huge holes in pension provision across the nation will become apparent, says the DIA.
According to the DIA, the Riester reform is now going backwards. Reinhold Schnabel, a professor at the University of Essen said: “The Riester reform has failed. Around 70% of the nation is shunning the product, as increasing new discussions about pension reform are unnerving citizens. Around 300,000 private Riester Rente applications have been cancelled, while only 200,000 have been taken up!”
The German government denies that the Riester Rente are failing, however, insisting that the products will take off eventually.
Allianz AG board member Paul Achleitner also disagrees that the Riester products have failed. “'I’m often asked about the German pension reform, and whether or not I think it has been a success. My answer to this is that it's ridiculous to make a judgment based on developments of only one year following legislative change.”
“There is no question that there’s room for improvement in terms of the actual bureaucratic elements that are associated with various parts of the so called "Riester Reform". But those are, I think, technical improvements that can easily be established and will be established, based on the experience that people have with the products.
“Some people are pointing to the fact that there is not as much sold on the retail side, in terms of Riester products. However, they shouldn’t overlook the fact that there is a wave of incentive-based corporate pension schemes building up that are being distributed through corporate channels, rather than being sold over the counters of banks and insurance agents.
“You have to understand the overall picture to draw a conclusion. And actually, it's a rather encouraging one,” adds Achleitner.
Riester-Rente are private pension products named after labour minister Walter Riester.