Walter Riester, the former Social Minister after whom the Riester pension is named, has criticized the newly approved reform of private retirement provision.
He told the “Frankfurter Allgemeine Sonntagszeitung” that “once again a chance for lowering costs has been missed”. In his view a mandatory private pension scheme would cut distribution expenses because advisers would no longer have to spend time convincing customers that they need the products.
Riester also points out that saving for old age competes with present consumption desires and obligations. He argues that without private savings “some people risk falling into old‑age poverty because the statutory pension is not sufficient for everyone”. In that case the state would have to step in again with tax‑funded support.
The new cap on advisory costs for the standard pension product has been cut to one percent, which Riester says is too low. He stresses that good advice is expensive and that if costs are capped too thinly, providers will stop selling the product and instead push alternative plans outside the standard scheme. He cites that the state-run German Pension Insurance spends €5.2 billion on managing pensions with contributions – after a tax subsidy of roughly €280 billion – amounting to about 1.8 percent of costs.
Riester defended the previously mandated guarantee of 100 percent of contributions and allowances at the start of retirement and criticized the reform’s allowance for non‑guaranteed contracts. He argues that the money put aside by savers and taxpayers should at least stay safe through the accumulation period, and that the guarantee was a key reason many contracts have yielded unattractively low returns.
On a more positive note, Riester welcomed the inclusion of self‑employed workers and those in occupational pension schemes into the subsidised retirement scheme. He calls this a first step toward integrating self‑employed people into the statutory pension system. He also welcomed the increased and simplified allowances.
Finally, Riester conceded that the old rules were overly complicated. For instance, to qualify for the maximum grant, the savings amount and the subsidy had to equal four percent of the previous year’s income – a calculation that required extensive checks.
