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IPE special report May 2018

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Record demand for Germany’s Riester pensions

GERMANY- Demand for the ‘Riester-Rente’, a government-subsidised private pension launched in 2002, hit a new record last quarter, pushing the total number of contracts for the pension to more than five million, according to German insurance lobby GDV.

GDV said that in the fourth quarter alone, 670,000 new Riester contracts were sold, exceeding the record figure of 460,000 for the first nine months of 2005. All told, almost 5.4m Riester contracts have been sold, representing roughly 18% of its total market potential.

The sudden rise in demand for the Riester pension follows improvements made to it by the government in 2004. These include allowing greater portability, streamlining the criteria for subsidies and lifting a requirement on monthly contributions.

Berlin-based GDV also said 150,000 ‘Rürup-Rente’ contracts were sold during its inaugural year. Launched in January 2005, Rürup is a third-pillar pension mainly aimed at the self-employed who do not pay into the state-run pension scheme.

Regarding demand for second-pillar pensions, a recent study said that in mid-2004, around 60% of German salaried employees owned some type of corporate pension, up from 38% at the start of 2002. The increase was partly driven by demand for the second-pillar version of Riester, known as “Entgeltumwandlung” in German.

GDV also said strong demand for second- and third-pillar pensions helped lift total insurance contributions in 2005 by 6.8% to €75bn.

In Germany, insurers are big players in the second-pillar pensions, offering all but five forms of pension administration. These include the Direktversicherung (direct insurance), Pensionskassen (traditional pension funds), the Pensionsfonds (equity-oriented vehicle) and Unterstützungskassen (support funds).

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