For a long time, financial service providers have been committed to providing information to their potential customers – especially when it comes to the topic of old-age provision. This is good and gratifying. But what does the practice look like?
In order to find this out, around 50 Riester subsidy calculators were examined as examples, with alarming results.
The industry had about eight years to gain experience with the Riester business. The second part of the investigation into pension calculators also reveals appalling shortcomings. Only a minority of the more than 50 Riester subsidy calculators examined provide information on individual Riester subsidies beyond 2009.
This is amazing. After all, taking out a Riester contract is an investment that will last for decades. The prospective customer is usually left alone with the question of whether and how the state subsidy changes in the course of the contract years. In order to be able to compare the mass of Riester subsidy calculators, the study was limited to Riester subsidies for 2009. It would have been expected that there would only be marginal and thus tolerable deviations. But far from it. In the May issue of Versicherungsmagazin, the first 16 Riester subsidy calculators were compared on the basis of four test cases – there were 16 different results! None of these calculators calculated correctly. It is the level of deviation and its frequency that is of concern, rather than the existence of individual spectacular outliers.
A potential customer who wants to obtain an overview of his Riester subsidy on the Internet before taking out a Riester policy is very likely to receive three very different pieces of information – and has previously had to provide very different “indispensable” details. One calculator wants to know the spouse’s income, the second doesn’t record this income at all and instead only wants to know the customer’s tax bracket, and the third apparently makes the subsidy amount dependent on the first name of the children, of whom another only wants to know whether they were born before or after January 1, 2008. The disparity of results is likely to cast considerable doubt on the competence and credibility of providers and dampen interest in signing up. Do the calculators from the May issue of Versicherungsmagazin represent the negative selection or are they representative? The answer is sobering. Only two subjects correctly calculated both the allowances and the Riester tax subsidy.
When it came to tax incentives, there were some that were still using the old tax law for 2009. Others already took into account the 2009 tax reform, which came into force retroactively this year. Only two Riester subsidy calculators passed all four test cases flawlessly: the one of LVM from Münster and the one of Bundesversorgungswerk from Hamburg. If one were to limit oneself to the assessment of the allowance subsidy alone, there are other providers worth mentioning – namely additionally Hannoversche Leben, R+V, Schwäbisch Hall, Stuttgarter and Universa (see box on the right). If, however, in test cases 3 and 4 the first-born child had been born only one day later, only the Bundesversorgungswerk, Hannoversche Leben and R+V would still have error-free allowance calculations.
The frequently overlooked discrepancy between child benefit eligibility and child allowance eligibility in the last calendar year of child allowance eligibility leaves the others flabbergasted. The handling of child allowances at R+V has been solved in an exemplary manner. Not only are the allowances calculated correctly, surprising results are even explained to the customer. The study did not focus on the Riester incentives during the entire contract period because only few providers provide any information at all in this respect. These are AWD, Bundesversorgungswerk, DWS and Helvetia. Some others provide funding information for the total funding or for a few selected calendar years. These are Badenia, CiV, Commerzbank, Deutsche Bank, Gothaer, LBS, Mannheimer, Postbank, Provinzial Rheinland, R+V, Stuttgarter, Union Investment and Victoria. In principle, the information on Riester subsidies beyond the current year is encouraging. The joy is usually clouded by the fact that the information is not correct.
The figures from 2009 or 2010 are simply carried forward for subsequent years – sometimes without taking into account the loss of child allowances or changes in taxable income due to the Retirement Income Act. This is a missed opportunity to educate the potential customer about their investment resources. This flashes somewhat at DWS and is only comprehensively represented by the occupational pension fund. In addition to the allowances and Riester tax subsidies, the tax savings from the tax reforms of 2009 and 2010 as well as the future additional tax savings from the Retirement Income Act can be switched on and off here.
This can be presented either in tabular form for each year, in summary form or graphically. The dominant error in the second part of the study as well is the disregard of the income reference values for the allowance and Riester tax subsidies. If only the income subject to pension insurance of the person directly eligible is required for the allowance, all other income (subject to income tax) is also required for the Riester tax allowance. In the case of married couples, even the corresponding income of the partner. If this is not taken into account during data collection, the results will automatically be wrong. Dangerous urge to simplify New oddities emerge in the second part of the study. Thus, instead of using the individual values entered, the Riester subsidies are calculated using data from – more or less similar – sample cases.
This is particularly the case with HUK-Coburg and LBS. At LBS, the subsidies are calculated using sample cases and these are then given in summary form over the entire term. It is made clear that these are sample case calculations – but without giving a sense of how much the individual result differs from the result of the related sample case. But even the calculations with the sample cases did not stand up to recalculation. In the case of HUK-Coburg, on the other hand, the subsidy is stated in detail from 2009 – but regardless of the Riester annual contribution entered, it is always an allowance-optimised Riester annual contribution.
Another peculiarity is the urge to “simplify” the inputs – according to the motto “the fewer inputs the better”. The consequences are Riester subsidy calculators with high entertainment value and low information value. Examples of this are provided by the Sparkassen finance portal and even more clearly by Provinzial Versicherung in Kiel. Here just the income (which?) and the number of children (from whom?) – separated by birthday before and from 1 January 2008 – are asked. Marital status and other master data are not collected, but Riester subsidy information is nevertheless provided.
After all, the financial portal already collects a maximum of six data, coyly in a corner of the mask. Each of the providers was given the opportunity to comment on their findings. The answers (too) often revealed ignorance and misinterpretation of legal regulations. Obviously, the acceptance quality of the subjects can be optimized. This is particularly true for direct insurers, where no sales force can correct incorrect information provided by the Internet subsidy calculator during the customer meeting. It is also astonishing that in insurance groups with several companies there are not only different Riester subsidy calculators, but also that the results differ greatly – mind you with the same test cases. Overall, the result is a debacle for the financial services industry. Potential customers who want to find out about their subsidies from several providers are hardly encouraged to make long-term investments in their old-age provision due to the diversity of the results and the focus of the subsidy information for one year.
The existing crisis of confidence in the financial services industry cannot be remedied in this way. Improvements are in order! It is gratifying that numerous subjects have announced improvements. These include Asstel, Badenia, Debeka, Deutscher Ring, DEV K, Hamburger Sparkasse, Hannoversche Leben, Mannheimer, Nassauische Sparkasse, R+V and Zurich. This will encourage more companies to make improvements. This will be assessed in a follow-up article.
by Dr. Johannes Fiala and Dr. Wolfgang Drols
by courtesy of
www.all4finance.de (published in Versicherungsmagazin 06.2009, 50-53)
Our office in Munich
You will find our office at Fasolt-Strasse 7 in Munich, very close to Schloss Nymphenburg. Our team consists of highly motivated attorneys who are available for all the needs of our clients. In special cases, our law firm cooperates with selected experts to represent your interests in the best possible way.
About the author
Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
»More about Dr. Johannes Fiala
On these pages, Dr. Fiala provides information on current legal and economic topics as well as on current political changes that are of social and/or corporate relevance.
Arrange your personal appointment with us.
You are already receiving legal advice and would like a second opinion? In this case please contact Dr. Fiala directly via the following link.
The first telephone call about your request is free of charge.