The German retirement system will have to continue to adapt to new circumstances through a series of changes to sharpen its private and occupational pensionsprovision, according to panellists speaking at the virtual Handelsblatt annual conference on occupational pensions this week.
Measures should be adopted to make savings products “more profitable than today”, if the aim is to rely on private pension provisions, said Dorothea Mohn, head of the financial market team at the organization for the protection of consumers Vzbv.
She said that savings through equity investments, diversification and waving guarantees are necessary to increase returns for private pensions, adding that an Extra Rente would reduce the costs for marketing retirement products.
“If we are not ready for this, then we have the statutory pension systems in Germany and the starting point [for a change] can be found there,” she added.
Axel Kleinlein, board member of the Bund der Versicherten, agreed that the Extra Rente “can be a solution” to having a grip on costs, but capital-covered pension provisions are seen as “synonymous of life insurance”, which is “highly problematic”.
He added that retirement provisions have to be shaped according to individual needs, and options expanded.
Georg Thurnes, chair of the board for the occupational pension association aba, pointed that with or without negative interest rates, the only option is to save in the “active phase with possibly a lot of equity”.
In the “pension phase” the goal is to guarantee people pension benefits until the end of life. “Profitable saving, yes, but collectively please, so that fluctuation risks will be moderate” and savers receive benefits until the end of their lives, he added.
Insurance products do not currently represent a viable solution for long-term capital investments necessary for pension provisions, Mohn added.
“It makes no sense” to buy products for private retirement provisions if savers would have to adopt “conservative” strategies for capital investment, she said. “The way to do capital investment has to change.”
A reduction, or the abolition, of premium guarantees can work only in combination with changes in capital investments.
The demographic development forces a shift to a capital-covered pension system. “The capital cover has to be boosted,” Thurnes said, adding that he doubts new models are necessary.
The occupational pension schemes already offer “what is needed”, with “efficient costs structures”, and the possibility of collective capital investments that are profitable. The pure defined contribution schemes would be “an ideal instrument” for the system, Thurnes added.
This has not been achieved for private pensions, however, said Peter Schwark, member of the management team at the insurance association GDV, adding the complexity of the subsidies’ structure poses a problem.
GDV is calling for expansion of the pool of people entitled to subsidies to include self-employed, for example, and to simplify the subsidy system. “The Deutschlandrente is a high risk, very volatile construct that is not fit for all the people,” Schwark added.