The reform of the private, subsidized retirement savings system will bring greater flexibility and fairer cost structures starting in 2027. Prof. Dr. Matthias Beenken, an insurance expert at Fachhochschule Dortmund, provides guidance on the launch of the new retirement savings account.
Starting in 2027, the retirement savings account is set to replace the Riester pension—without a guarantee requirement, offering higher potential returns and favorable terms, for example through investments in passively managed funds (ETFs). Many private providers and neobrokers are ready to go and are already courting customers. “The government-organized standard offering, on the other hand, will likely not be available in time for the start of the year,” predicts Prof. Dr. Matthias Beenken. Is it worth waiting?
Prof. Beenken teaches and conducts research in the field of insurance at Fachhochschule Dortmund. He says, “Anyone who hasn’t yet built up a retirement plan should seize this opportunity and not put off the decision any longer.” Waiting for a standard government-sponsored plan offers no clear advantage. A key strength of the new regulations governing subsidized private retirement savings is the ban on upfront sales charges. This creates genuine freedom to switch providers, as account balances can be transferred more easily to other providers.
Pension reform: Poverty in old age at 85?
The fundamental issue is crucial
Nevertheless, the insurance expert advises keeping a cool head and warns against making hasty decisions. “Consumers must first ask themselves the fundamental question: Do I want to treat retirement planning primarily as a financial investment, or do I want it to provide a guaranteed, lifelong pension? Anyone who wants to be financially secure for the rest of their life still has no choice but to opt for a pension insurance plan.” In the future, these will be available in various versions, including options with a 100% or 80% guarantee, or without a guarantee. A purely investment-based savings product, such as a retirement savings account, carries the risk of premature withdrawal—for example, to buy a car or a property. Fluctuations in value during stock market crises also make some customers nervous and tempt them to cash out prematurely. “Anyone who lacks the discipline to leave the money untouched until retirement must repay the government funding.” For these individuals, an insurance solution may be safer.
Counseling Recommended
Prof. Beenken therefore believes there is still a need for guidance. “At first glance, the retirement savings account sounds pleasantly simple, but it has its pitfalls when you look at the details.” He advises those who already have a Riester plan to exercise particular caution. “The previous Riester funding program was particularly beneficial for low-income earners and families with children thanks to the fixed subsidies. Since the new funding program is strictly based on individual contributions, not everyone will benefit from switching.” According to Prof. Beenken, independent counseling on selecting the right product and strategic planning therefore remains highly recommended. “With a retirement savings account, you have to manage your own payout plan and accept the risk that the money might not last until the end of your life. Good counselors will explain these dynamics and the pros and cons of the various products.”
At the same time, he urges policymakers to implement a fundamental reform of the pension system. “Germany is once again tackling retirement planning from the wrong end. Instead of painstakingly patching up the private—and voluntary—third pillar, we need a comprehensive, integrated concept—with a solid basic pension and mandatory employer-sponsored retirement plans,” said the economist.