GERMANY - Eighteen months after the introduction of the Riester reforms in Germany, calls are increasing for further changes.
In a statement, Paul Achleitner, member of the management board of Allianz, has said the current system is not working and called for more far reaching changes including new concepts to help promote private pension savings.
This follows a report by Allianz suggesting that reductions in the state pension are likely to be more painful than people are being led to expect. The standard pension in Germany is currently 70% of the average wage. Riester plans to lower this to 67% by 2030, keeping support at under 20% of the state budget. But the report estimates that if the government keeps to its budget targets, pensions are likely to have to fall to closer to 63%. The average pension could be as low as 53%.
The government is already facing a hole in its pensions budget. Figures from the Bundesversicherungsanstalt für Angestellte, which crunches numbers for the state system, show liabilities increasing by around 0.4% this year and disappointing jobless figures mean income has been running below expectations. Plans are expected to be announced to reduce reserves from 50% of one month’s payments to 30%, giving access to e2.8bn of emergency money.
The Rürup Commission, which has been charged with looking into changes, has presented the government with a number of initial proposals, including raising the retirement age to 67 and introducing a new adjustment formula to reduce the state pension in line with the number of people paying in. More recently the commission has also suggested delaying first payments until the month following an individual’s last wage packet.
Riester was intended to help people compensate for cuts in state pensions by offering tax support for private savings, but new figures show that only 20% of those eligible have opened accounts and a survey by the Deutsches Institüt für Altersvorsorge, the German pensions institute, suggests that 70% have no plans to do so.
Earlier this year the Bundesverband Deutscher Investment und Vermögensverwaltungs-Gesellschaften, the German association of investment and asset management companies, put forward proposals for a new personal account that would follow an individual throughout his or her lifetime.
In contrast to Riester, this would demand no guarantee of regular payments. It would be easier to carry from job to job - only the name of the employer would need to be changed - and taxation would be deferred until after retirement, while Riester is subject to a complicated tax reclaim system. The account would be extended beyond employees to include government officials, the self-employed and the unemployed.
The Rürup Commission is due to present its report to the government in the autumn.
Ulla Schmidt, the SPD minister responsible for social security has already indicated that she would like to see a new round of reforms during the current legislative period.
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