GERMANY - Germans are already cancelling their private pensions policies just over 18 months into the Riester reforms, according to a survey from the German Institute of Retirement (DIA).
The survey’s key finding indicates that since the beginning of the year 300 000 private ‘Riester’ pensions in total were cancelled.
In the same period, corporate schemes grew in popularity, attracting 200, 000 new members, undoubtedly some of which were transferred from the private schemes. That said, there is still a minimum of 100 000 policies which disappeared outright with no replacement scheme being sought, commented
Based on the current pensions contributions, today’s 70% pension will become a 58% pension if Germans do not increase what they save for retirement, according to Reinhold Schnabel from the University of Essen, who presented the report on behalf of the DIA at a Berlin press conference. Increased take up of the Riester pension products is vital if future pensions are to remain in line with today’s, he added.
For a 70% pension , a person born in 1950 who wants to retire in 2015 would now have to contribute 6% of their gross monthly earnings. For a 100% pension, contributions would need to be 8%, outlined the report.
Most German industry experts agree that it is still far too early to cast a verdict as to whether the new pensions system will work in the long run, especially considering the difficult economic situation into which the reforms were introduced. To date, 15% of the population aged 18 to 65 has opted for a private pension.
“It must be made clear to the population, how drastic their individual financial situations in old age will be,” said DIA spokesman Bernd Katzenstein.
“If they do not change their attitudes to saving for retirement, massive pensions deficits will become very apparent for a broad cross section of the population.”
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