GERMANY - The arrival of new Riester products have already hit their first opposition as consumer group Verbraucherzentrale NRW has warned people should wait for better offers instead of signing the first Riester contracts for purchasing homes which come onto the market.

The German parliament agreed in June last year to accept a long disputed bill which includes purchasing flats and building houses through the state-subsidised third pillar pension system Riester. (See earlier IPE story: Parliament approves use of pensions assets for housing)

But a consumer group has now urged people to wait for better offers before signing a contract straight away.

This might dampen the initial boost these long-awaited housing Riester were forecast to have as a spin-off effect from the continuing huge interest consumers have shown in other forms of Riester savings.

Everybody who uses the money to buy a flat or build a house for their own use - both the purchase or the completion of the building have to have been done after December 31 2007 - can apply for Riester subsidies.

If the home is sold and no new flat or house is financed and used by the Riester beneficiary, the subsidies have to be paid back or put into a different form of Riester saving.

Banks have been offering Riester building society savings plans since the new regulation has come into effect in January.

However, the consumer group warned the interest on these savings plans is rather low and only attractive because of the state subsidy.

"More offers should come to the market over the next months - so those who wait might be the winners," said Thomas Bieler, financial expert at Verbraucherzentrale NRW.

No offers have been put out by banks yet on the second form of using the state subsidy for purchasing a home: paying back a mortgage with the Riester money.

But Bieler warned any "Riester-mortgage" which might be offered in the future has to be carefully looked into, as it might be that despite the state subsidy it is still more expensive and has less attractive pay-back rates than other mortgages.

Werner Lohre, the head of one of the largest German unions, IG Metall, last year warned introducing more possibilities for using retirement accounts was "dissipating energies". (See earlier IPE story: Make second pillar mandatory - union head)

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