GERMANY - The finance committee for Germany's lower house of parliament (Bundestag), has approved changes to the Rürup-Rente, a private pension for the self-employed, in a bid to boost its attractiveness.
Named after German pensions expert Bert Rürup, the pension acts as a substitute for the state pension. It was targeted mainly at Germany's self-employed who do not pay into the state-run pension scheme.
But demand for the Rürup pension has been lacklustre since its launch in January 2005 and part of the explanation is the absence of a generous tax break.
To date, only 215,000 Rürup contracts have been sold compared with more than 7m Riester pensions which provide generous tax write-offs.
Under the changes approved by the Bundestag committee, a self-employed person will be permitted to deduct from income tax a substantial amount from contributions to a Rürup pension.
For example, if a self-employed person makes an annual contribution equalling €5000 to the pension, 62% can be written off. Until now, tax authorities had permitted a far lower percentage of Rürup contributions and in some cases, nothing.
The Bundestag must still approve the changes, but that is likely following the finance committee's move. Once approved, they are to take retroactive effect from January 1, 2006.
Separately, independent financial adviser MLP said yesterday that contributions to its retirement products were €4.3bn in the first nine months of 2006 - under the €4.4bn taken in during the same 2005 period.
Breaking down the contributions, MLP said 20% of the total went to Riester pensions, while 40% went to the Rürup pension and worker's disability insurance. The remaining total was for other products like life insurance policies.
Corporate pensions also made up 4% of sales in the nine months, MLP said. By 2010, the IFA aims to double that figure. MLP's pre-tax profit for the period was €46m, well above the same 2005 period.
In September, MLP acquired Feri Finance, whose portfolio includes Germany's leading investment consultant.
MLP chief executive Uwe Schroeder-Wildberg said that while both MLP and Feri would continue to operate independently of each other, the asset management know-how from Feri would be transferred to MLP.