The debate about how to promote private retirement provision more efficiently continues. Federal Finance Minister Christian Lindner has hinted at a reform that would also support so-called retirement savings accounts. Prof. Dr. Stefan May, Head of Investment Strategy at Quirin Privatbank and at quirion, puts the issue into perspective.
In the discussion about promoting private retirement provision, the term "retirement savings accounts" is now coming up more and more often. What exactly is that?
In principle, it's about making better use of the return opportunities of the capital markets for retirement provision. There are various models internationally. The basic idea: you set up a securities account and can use it to save for old age with state support – for example, with an ETF savings plan. Beyond the basic idea, though, a great deal would come down to the details if such a model were implemented here. That means, for instance, the level of the subsidy and the conditions attached to it.
In May, the Deutsches Aktieninstitut and dwp bank published a joint study on retirement savings accounts. One of its recommendations: make investing in equities easier and dispense with guarantees. What do you think of that?
For anyone looking to build wealth over the long term, equities are an indispensable asset class – especially in your younger years. Guarantees are expensive and always come at the expense of returns – bad news for retirement provision. Make investing in equities easier, dispense with guarantees: reduced to that short formula, I can only agree, even if I wouldn't sign off on every single one of the study's recommendations.
What do you like about it, and what less so?
I like the call for retirement savings accounts to be simple and easy to understand, for example. After all, the aim is for as many people as possible to use them. However, I don't think a minimum equity quota, as proposed there, is necessary, for instance. You can get the message across to people that equities can be very useful for building wealth without any statutory requirements.
So should people be completely free to decide how they invest?
There do need to be a few rules. After all, there's a specific goal, namely retirement provision. Ideally, that should be achieved as efficiently as possible. I would consider it especially important, for example, that there be an upper limit on the maximum permissible product costs. No more than 1 percent per year. Better still, less. This aspect is missing for me in the current debate.
Can't competition "sort that out"?
Just think of "Riester." Experience with subsidizing financial products for retirement provision has shown that competition works only to a very limited extent here. In any case, it has not led to effective and, at the same time, low-cost investment alternatives across the board. Back at the end of 2022, we already worked out a proposal for retirement savings accounts together with our competitor Scalable. We also sent it to the Federal Ministry of Finance.
What is your proposal?
We modeled it on the British "Individual Savings Accounts." In rough outline: every employee can open a savings account for their retirement provision. Each year, up to a certain cut-off date, you could pay a maximum of €20,000 into this account. All capital gains from this account would be exempt from capital gains tax, provided the capital is then actually used for retirement provision. Experience from the UK shows that the tax exemption and the tie to a cut-off date create a strong incentive to save, especially for lower income groups.
What became of your proposal?
Frankly, I don't know. We thought it was worth discussing – as the current debate certainly shows. But we never heard anything back. Either way, I would be very pleased if a simple and effective model of subsidized retirement savings accounts were implemented. When it comes to the cost cap in particular, though, I'm skeptical. Many product providers would probably be up in arms against it.
Is it worth waiting for the new retirement savings accounts?
Anyone thinking about private retirement provision should definitely not wait. Including equities via a global ETF portfolio in your private retirement provision – that pays off in any case. The earlier you start, the better. quirion's savings plan is ideal for this too: with savings plans on the global ETF portfolio, you can start building wealth at quirion from as little as €25 a month.
