BERLIN (dpa-AFX) - Citizens are to be given new opportunities to provide for their old age privately and with state support. A commission set up by the federal government presented proposals on Monday for a fundamental reform of private pension provision. The core: The Riester pension is to go away - however with Bestandsschutz for past contracts.

Recommended would be not only improvements of the existing Riester system, but fundamentally new solutions, said finance secretary of state Florian Toncar in Berlin. A goal of the advance is it to make more net yield possible and to bring so again more humans to put aside state-claimed money for later.

Problems with the Riester system

This is because the current Riester pension is not a successful model. The government-mandated lifelong private pension was actually intended to provide security for citizens whose statutory pension will not be sufficient in the long term. It is required with state allowances and tax benefits. In addition, providers are required to guarantee 100 percent of paid-in contributions, so that no risk is taken. But because of this, the potential returns are also enormously limited. At the same time, there are high acquisition and administration costs that go to insurance companies and financial institutions. Many have therefore already decided not to continue paying into their Riester contracts.

16 million Riester contracts - but hardly any new ones

According to figures from the German insurance industry, there are currently around 16 million Riester contracts. Around ten million of these save via a traditional insurance contract - bank savings plans and investment fund contracts are less common. Recently, however, fewer and fewer Riester contracts have been concluded. The German government is therefore concerned that people are not making adequate provision for their old age. In the coalition agreement, the SPD, Greens and FDP therefore agreed to consider a reform.

Proposal: Reward risk with higher returns

The working group is now proposing several products that would allow pensioners to earn a higher return, depending on their own risk tolerance. In this way, old-age provision could also be offered with lower guarantees and, in return, higher potential returns. A major role is to be played by retirement savings accounts in which the money is invested in exchange-traded index funds (ETFs), for example. In order to collect the government claim, the deposit would have to remain in place until retirement age.

More risk is also to be allowed in insurance models - by guaranteeing less of the premiums paid in, rather than 100 percent. This would allow insurers to invest the premiums more profitably on the capital market. In addition, it is to become easier to switch providers. It should be possible to compare competing products via a website.

Existing Riester contracts could be changed

Existing Riester contracts are to remain valid for the time being - otherwise it would not be legally possible. However, if all contract partners agree, they should also be able to be adapted so that they are competitive with the new products.

What should remain

The group of experts made up of politicians, scientists, social partners and consumer advocates wants to retain the way in which the state is demanding subsidies: There will continue to be allowances, special subsidies for young people and people with low incomes, and the possibility of deducting special tax expenses. It is still unclear whether the limit of 2100 euros will be raised for this. The principle that no taxes are due during the investment phase, but that they are due when the money is paid out - when the tax rate is likely to be lower due to lower income at retirement age - is also to remain.

Recommendations not unanimous

Not all recommendations were supported by all members of the expert commission. Partly there were majority decisions and on certain points also critical special votes, said Toncar.

The Federation of German Consumer Organizations (vzbv), for example, was disappointed that a publicly managed pension fund was rejected by a majority. People would automatically pay into such a fund if they did not actively vote it out. The group had "no strength" for such a proposal, criticized vzbv head Ramona Pop. She said that a publicly managed pension fund with broadly diversified, long-term investments would be clearly superior to private offerings. From the point of view of the consumer protectors, a reduced premium guarantee for insurance products is also unacceptable.

How to proceed with the proposal

The Ministry of Finance is calling for a rapid political agreement based on the expert proposal. The next step would be to draft a bill. This would then have to be reviewed by the other ministries and approved by the Cabinet before it could go to the Bundestag. "I would like us to be able to carry out and conclude the legislative process in 2024," Toncar said./tam/DP/stw