Basic pension contracts, or Rürup pensions, are enjoying a renewed popularity in Germany, a sign that savers are aware of the opportunities offered by capital markets to invest retirement savings in the long term, while Riester-Rente contracts offering pension guarantees are collapsing.
Last year, almost 133,800 new Rürup pension contracts were signed, up by 14.2% compared with 2022, according to figures published by the German Insurance Association (GDV). Annual contributions grew by 22.7% to around €502.8m year-on-year in 2023.
The number of basic pension contracts and contributions rose by 4.8% last year to around 2.7 million and €4.4bn, respectively, and annual pensions amounted to €95.1bn (an increase of 8.5%), the association added.
The total sum insured under Rürup contracts reached €10.34bn last year, the highest since the introduction of the private pension product in 2005, and up 22.4% year-on-year, GDV´s figures show.
The basic pension, known as Rürup-Rente from the economist Bert Rürup, is a capital-marked oriented private pension product, with contributions deducted from the taxable income, like in the first pillar, and suitable for self-employed or high earners.
The monthly basic pension is paid only after reaching 62 years old, and payouts are taxed, although the amount of taxes to pay is low, in line with the amount of pension received.
People in Germany have increasingly opted in the last few years for the Rürup-Rente, with the numbers of contracts signed and contributions going in a positive direction. The trend has surfaced as the government is trying to push reforms to invest more pension assets in capital markets, reducing guarantees.
The cabinet has proposed setting up a fund for equity investments in the first pillar to slow down the contribution rate increase.
In the second pillar, it has proposed to strengthen buffers for the social partner model and its defined contribution (DC) plans, for more aggressive investment strategies, allowing underfunding of Pensionskassen for investments with higher returns, and setting up a separate quota to boost infrastructure investments.
For third pillar private pensions, the government aims to make tax-free savings plans possible on securities, ETFs, funds, equities and bonds, with retirement savings accounts offered without guarantees and with an annuity option, state secretary Florian Toncar said in an interview.
German savers are disappointed by private pension Riester-Rente contracts with guarantees and high costs hitting returns.
The number of such contracts fell by 67.2% in 2023, with only 41,000 Germans opting for Riester products, GVD said in its report, adding that the reform of the third pillar is urgent.
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