It's absolutely crazy. The so-called Riester pension 2.0 is in the starting blocks and is everything we didn't want from an "equity pension". I'm not a news portal, so I don't want to go into too much detail about every option and what variants there are, but I'll come straight to the point of why the planned ETF pension is bad for you and is misleading you.
In a nutshell, the equity-based pension has a main selling point that the original Riester pension - which was invested in insurance and government debt instead of ETFs - also had in order to lure customers: state subsidies. In concrete terms, this means that if you pay in €1800 a year, the state will give you an extra €540. Isn't that great? The whole thing is also tax-privileged. And these were precisely the main arguments that aroused people's greed back then, lured them into the Riester pension and made Carsten Maschmeyer an ultra-multi-millionaire. Just like back then, the (neo)-broker industry around Trade Republic, Scalable and Smartbroker is already happy as a lark about the many poor souls who will fall for the ETF pension portfolios.
But ETFs are a good investment, what's the problem now?
Yes, this time it's not so much about what to invest in, but about how. But it's also about what to invest in. So far, no list has emerged with a complete overview of the assets that can be invested in. For comedy reasons, I would find it incredibly funny if you could invest your pension in an MSCI Russia at a later date and force the state to invest in Russia. However, if I were the state and really hated my citizens, I would only declare European investments permissible. That would also be peak comedy, but at our expense. Realistically, it will be interesting to see whether it is possible to invest your pension exclusively in another country, e.g. through an S&P500.
As I said, however, the problem lies in the circumstances surrounding it. Namely, with a private pension of this kind, a) you must not be fooled by the parameters that apply NOW and b) the parameters are not good even now.
For one thing, nominal promises are always such a thing anyway. The €540 you get in 2026 will have a completely different value than the €540 you get in 2060 thanks to inflation. "But Soprano, surely the amount of the subsidy can be adjusted" Yes, and you know what else can be adjusted? The age limits. And this is where it gets really bad.
So far, the plan is that you don't see your money again until you're 65. And after that, there is inevitably a payout plan until you are at least 85 years old. And this is the problem. With private pension provision, there is virtually no provision at all for you to decide your own retirement age. And that is a gigantic scam. It's not just about self-determination and that the start of payment is not guaranteed forever at the age of 65. But leaving aside the fact that the start of payments could also be increased to 70, 75, 80, 105 years with a simple majority in the Bundestag - you also have to look at the mortality tables of the insurance companies to be able to estimate the probability of getting that old at all.
If we just assume the best case scenario and agree everything so that you receive the money as early as possible, this means that it starts at the age of 65 and you receive the last installment at the age of 85.
How many of you will actually live to be 85?
That depends on whether you are a man or a woman (or one of the many other genders that exist, of course). In any case, men are only about half as likely to reach these high ages as women. The chance of a man born in 1980 reaching the age of 85 is estimated at 35%, compared to around 60% for women, which means that men are systematically at a disadvantage when it comes to retirement provision. This means that the majority of men will not see the money they pay into their pension again.
What happens in the event of death?
Although spouses can inherit the pension in full, children cannot. If both parents have died, they will only receive further payments for a "guaranteed period". However, if there is still too much capital left in the pension at the end of this guaranteed period, the state and the insurance company will split your money. Practical, isn't it? Incidentally, this is also the case with the current Riester pension and the insurance companies enjoy over EUR 3 billion a year from insured persons who die too young.
This is also the disadvantage compared to a normal custody account. You have little freedom and no flexibility, and if you die at an inopportune moment, some of your money is simply gone. And let's be honest, the sums that can be put into an ETF pension are limited and simply too low to live on properly in old age. The state is simply protecting itself against someone coming along who already knows that he is perfectly healthy and has half a million in old-age provision, which the state would then have to subsidize.
Let's draw another conclusion:
Someone who is 25 years old today and pays in for 40 years receives a subsidy of €21,600 from the state over the entire period, which is not secured by purchasing power, as well as a tax deferral - which was recently abolished for accumulating ETFs. In return, you are obliged to continue working under the boot of the federal government until it grants you the grace of retirement. And if you really want to see your money again in full, you have to manage to live on against the actuarial probability, in the best case forever. Sounds fair, doesn't it?
These ETF pensions would be a great thing if the current pay-as-you-go statutory pension were to be abolished in its entirety and the capital-based pension were to replace it completely. But the new Riester pension is not to be recommended simply as an additional way of investing money in state systems that you will probably never see again. What do you think?
--------------------------------------------------------------------------------------------------------
One more addendum: I've received a few comments that the new system is good or at least a step in the right direction. I would really ask: why? For decades, a large part of the tax benefits were available when saving in ETFs - until the advance tax lump sum was introduced. A privilege is taken away from you with the left hand and given back to you with the right hand - except that tax-free saving in ETFs is no longer possible in any amount.
And to be honest, I also thought that in a forum for financial freedom, everyone would agree that, in principle, every citizen should be able to decide for themselves when they no longer want to work. Why is it so stigmatized when people want to decide for themselves how they want to live their lives?
