The government has ruled out the possibility of private saving for retirement in Germany becoming mandatory, saying its pension reforms of 2001 and 2004 should be sufficient.
To encourage saving for retirement, the government created Riester Rente in 2001 – second- and third-pillar pensions that qualify for government
subsidies.
But demand for Riester has been far below expectations. While the market for the third-pillar pension is
estimated at 30m people, only 4.2m have signed up for it so far. The second-pillar version of Riester has also flopped in corporate Germany.
This led Franz Müntefering, chairman of the ruling Social Democratic party, to tell a party newspaper last week that the government “may have to consider making retirement saving obligatory”, if Riester did not catch on.
A spokeswoman for the German social affairs ministry said, however, that the government had no such intentions. She said that following
simplification of Riester last year, “we believe that the pensions will experience a renaissance in 2005”.
Under last year’s pension reform, known as AEG, the second- and third-pillar versions of Riester were greatly simplified. Regarding the second-pillar in particular, employees gained greater portability of their Riester pension and criteria for government subsidies for it were streamlined.
Regarding the third-pillar, Riester savers were permitted to withdraw up to 30% of their savings in a lump sum when they retire. This version was
further simplified by requiring a single application for government subsidies and not requiring any limits on monthly payments.

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