EUROPE - Initiative Finanzstandort Deutschland (IFD), the working party set up to stimulate Germany's financial services industry, has come forward with its first recommendations, including plans to simplify the private pension system.
The initiative, made up of the country’s largest banks and insurers, along with the Bundesbank, Deutsche Börse and the finance ministry, proposes pulling together support for private and company pensions in a personal account that would allow easy movement between products and transferability between jobs.
Josef Ackerman, CEO of Deutsche Bank and spokesman for the initiative, said “The aim is to get every tax-paying individual between 16 and 65 using personal pensions.” Recent figures from Allianz show sales of Riester pensions down 90% on last year.
Members have been unable though to agree on the proposals’ central concept. Initial reports suggested that a personal account would cover bank and insurance products, allowing savers to move between the two as circumstances dictate, but it appears increasingly likely that banks and insurance companies will offer separate “products”.
The Gesamtverband der Deutschen Versicher-ungswirtschaft (GDV) which represents insurers has opposed the flexible account saying that pensions are long-term projects and interruptions are not in customers’ best interests.
It also believes bundling bank products with insurance products would dangerously blur the line between risk and capital maximisation. The insurance industry has been under fire recently for low returns and it is known to be concerned that a flexible account could erode its advantage in the market.
This comes on top of government proposals to unify tax on pensions, which would see insurance products lose tax-exempt status. Step-by-step changes would see all pensions taxed at the returns stage. From 2005 50% of returns would be taxable over a minimum of e1575 per month, increasing by 2% annually until 2020, then 1% annually until 2040.
Contributions would be 60% tax-exempt up to a maximum of e20,000 per annum, rising 2% annually until 2025. The proposals follow a ruling by the high court earlier this year against the differential treatment of civil service and statutory pensions. The GDV has also reacted angrily to the government’s new tax proposals.
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