A pension savings plan ensures a higher standard of living in old age

The German Bundestag is debating a reform of private pension provision to pave the way for a share-based and therefore high-yield supplementary pension. The aim is to enable people to enjoy greater financial well-being in old age. This requires new, flexible framework conditions. The planned pension savings account has the potential to act as a catalyst. Particularly if it is opened up to occupational pension schemes.

“We have the chance to get something right in the area of pension provision. The proposed pension savings account is simple, guarantee-free, equity-oriented and high-yielding. If implemented correctly, it can act as a catalyst for a better standard of living in old age,” explains Henriette Peucker, Chief Executive and Member of the Board of Deutsches Aktieninstitut.

A prerequisite for this is that neither guarantees nor annuitisation are mandatory. This enables good returns through a high proportion of shares. Furthermore, we recommend opening up the retirement savings account to occupational pension schemes.

There is room for improvement in the tax incentives for the retirement savings account, as a comparison with other countries shows. In the USA, for example, retirement savings accounts are supported with a tax allowance equivalent to around 6,500 euros per year. That is roughly three times what is currently planned in the draft bill. Other countries such as France, Canada or Ireland offer even more generous support for pension savings accounts. This support helps to secure the standard of living in old age for the general population.

Furthermore, it is worth taking a look at the second pillar of pension provision, emphasises Peucker: “The coalition could make a major breakthrough if it opens up the retirement savings account to occupational pension schemes in the upcoming consultations. For employees, the retirement savings account would then be a simple solution for taking their occupational pension scheme with them when changing employers. For companies, it could reduce the effort involved in offering their employees an occupational pension scheme.”