Expensive, unprofitable, dispensable: The Riester pension is more controversial than ever. And mostly unprofitable for the insured. Especially when the insurance company also reduces the agreed pension entitlement. But that’s not okay.
Unfortunately, some large insurers have subsequently trimmed agreed Riester pensions in recent years. The district court of Cologne has now ruled in favor of a Riester saver that the insurance company Zurich Deutscher Herold cannot unilaterally reduce his pension entitlement. The judges ruled that the clause used in the policy, according to which the insurer can unilaterally reduce the pension until the pension begins, is invalid (Az.: 26 O 12/22). As a result, the insurer is not allowed to cap their customer’s Riester pension in the future either because of the clause.
How was the case?
In the case under discussion, the insured has been saving into a unit-linked Riester pension from the “Förder Renteinvest” tariff since 2006. As early as 2017, however, Zurich unilaterally reduced the so-called pension factor. This is the operand with which the capital saved is converted into a lifelong monthly pension. The result: For every 10,000 euros saved, the customer should now only receive 27.97 euros from the start of the pension instead of the 37.34 euros agreed in the insurance policy. This corresponds to a pension reduction of almost a quarter.
About a year ago, the insured complained about the reduction in his future pension payment and received support from the Finanzwende citizens’ movement. According to the verdict, the insured person was allowed to rely on this information in the contract – even if it did not contain the word “guarantee”. The insurer denied that.
In the opinion of Finanzwende, the success in court has a signal effect – both for the providers and for thousands of policyholders. Because the dispute is also about the fundamental question of whether insurers are allowed to subsequently reduce an originally agreed pension, for example due to low interest rates on the capital market. The association points out that many pension insurance policies at Zurich and other insurance companies contain similar clauses.
The verdict is not yet legally binding. The Zurich Deutscher Herold can appeal against this.
What is the Riester pension?
The state-sponsored private old-age provision in the form of the Riester pension was launched in 2002 to compensate for the reduction in the statutory pension level decided by the then red-green federal government. But the state-subsidized pension product encounters a few reservations. Critics see and saw this more as a subsidization of the banking and insurance industry and a de facto reduction in pensions by politicians.
Because the corresponding products cost the saver too much in terms of commissions and administration. This reduces the returns for savers and instead enriches banks and insurance companies. In addition, the lack of flexibility of the products due to the state-limited risk also reduces the potential for returns. Not surprisingly, far fewer citizens than intended use the pension product. An additional private old-age provision is actually necessary in order not to starve later.
