A marketing expert remarked: “The best marketing agency is in Berlin – that is, the government”. First came the Riester pension with subsidised allowances, then the increasingly tax-deductible basic pension – also known as the Rürup pension. One financial services provider said: “The shift from state to private retirement provision is a growth market for decades … But it’s as if we are sitting on an oil well. It’s drilled, it’s huge and it’s going to gush.
Private basic and Riester pensions cannot be profitable?
The administrative costs of the Deutsche Rentenversicherung (DRV) are up to just over 1% of the premium income – there are no acquisition costs for this equally tax-privileged statutory basic pension. In the case of basic annuities in the insurance industry, costs are up to ten times higher for an average term, including acquisition costs. If, at least in the medium term, our market interest rate for safe government bonds is around “zero percent”, the investor will buy into almost certain nominal losses in the foreseeable future, i.e. not even inflation compensation. However, anyone who notices this as a saver is ill-advised to get out – because then the uncomfortable question of the alternatives arises.
Are Draghi and the ECB to blame for the low interest rate?
When some journalists claim that the ECB is responsible for the low interest rate, they have no idea about economics or the monetary economy – or both, appear to be the real conspiracy theorists. The “zero interest rate” brings peace, not only because then there need be no more interest in prices, i.e. the goods become cheaper. Money remains a medium of exchange, but loses its importance as a store of value and as a capital investment. Since the announcement of the euro, through the introduction of the ECU in 1998 – at the latest since the introduction of the euro in 2002 – it has been clear to real experts that the risk-free zero interest rate will be the future. In anticipation, market interest rates had already fallen by about half by 1999 – most of the life insurers’ expiry forecasts had already fallen by 2003, after the stock market had also collapsed.
In a mirror image, policyholders (UN) of life insurance policies get a lot less than they had paid in, even after taxes and contributions – even for the Rürup pension. To make the insured believe that this will improve when Draghi is gone as an identified culprit appears to be a promising way of dulling the people.
Fortunately, there are the marketing experts in the contract drafting
It is probably common practice for business economists from a university of applied sciences with a focus on marketing at banks and insurance companies to draw up model contracts there. Trained lawyers usually only see these documents when a customer sues for rescission after a contract has been revoked. No other industry has such a hard time attracting qualified personnel or has to pay so much for it – including already for trainees. Writing off conditions without understanding their meaning is commonplace – recently, at an industry event, a board of directors noted that a “competitor” had written off its conditions, even adopting the company name.
Reversal by revocation or as compensation for damages
The judgement of the Higher Regional Court of Saarbrücken (OLG) is exemplary as (almost complete) handicraft instructions for compensation for the deceived feeling customer of a Rürup pension (dated 04.05.2011, file no. 5 U 502/10 – 76; and additionally dated 26.02.2014, file no. 5 U 64/13). First of all, it clarifies that if the agent or insurance broker makes mistakes in his advice, the insurer (BoD) behind him is also jointly and severally liable. A good prospect of compensation for UN.
This is remarkable because a broker had (wrong) advice – and then usually only the broker is liable; however, there are numerous exceptions – for example when the BoD has to recognize the wrong advice. In the specific case, the estate agent had intended to provide for the widowhood of his illegitimate partner, which is simply unthinkable in the case of unmarried persons.
Even if a broker mediates, the BoD remains obliged to provide information. And because the broker did not have any consulting documentation, the burden of proof was reversed. This is also the case with doctors and architects who do not carefully record their consultations. Fault is presumed, so that brokers and insurers are almost certainly responsible and therefore liable.
Solely liable brokers have already been ordered to repay the contributions step by step in return for the transfer of pension rights from the Rürup pension.
Masses of possible sins of omission lead to liability for reversal
- The Rürup pension is always protected against seizure and insolvency-proof, as was also claimed by an insurance association: “Anyone who has such friends – legally incorrectly argued – really does not need enemies any more. Some providers from Switzerland and Liechtenstein also advertised with “bankruptcy protection”, where unfortunately there was none legally.
- The contract for a basic annuity is not lendable, not inheritable, not saleable, not assignable, not pledgeable, and cannot be terminated prematurely in accordance with the contract. There is also no capital payout and no capital option. The lack of documentation of the consultation, but also the corresponding gaps, are later the “best evidence” in court that there must have been an erroneous consultation, and the UN therefore assumed the opposite, although it is also possible for the UN itself to terminate the contract without notice – if there is a sufficient reason for this. This is something that creditors and insolvency administrators also practice quite successfully if they know how attachment can work in such cases.
- Tax shifting models – such as the basic pension and Riester pension – are generally unsuitable for old-age provision, because in view of the threat of “old-age poverty” people will want to avoid any tax expenditure in old age anyway. This massive disadvantage later, in old age, is hardly ever explained – the “tax saving effect” is rather mostly brought to the fore on its own, without showing almost tax-free alternatives. The BGH (ruling of 26.08.2018, file no. I ZR 274/16) considers advice on alternatives to be contrary to duty if no comparative calculation is offered with regard to profitability or economic viability taking into account tax effects.
- Life insurance companies could use up to about two dozen legal possibilities to reduce their benefits later. Just as the legislator and fiscal courts could decide on even more extensive taxation and/or social security contributions in the future. Instead of explaining this, the focus is often on the deposit phase, i.e. only its tax advantages and fantastic, sometimes deliberately unrealistic profit prospects. Many consumers have not yet realised that pensioners are paying more and more taxes.
No damage calculation without experts?
If the UN withdraws and reverses its insurance, it will receive the contributions plus the benefits back, which it must explain itself in accordance with BGH requirements, which it will hardly be able to do without an expert.
If, on the other hand, he is entitled to compensation, he may have to explain, with the help of experts, why a certain partial loss has already occurred with certainty, otherwise no conclusive action for payment can be brought. For a declaratory action, tangible concrete evidence of a probable loss is sufficient, such as in the case of a Rürup pension the personal nature of the insurance benefit, which is hardly inheritable – or, for example, the reference to various tax disadvantages in the case of payment in old age. For this purpose, a comparison must be made between the assets and the alternative fictitious investment that would have been made if the advice had been correct. The decisive factor here is the demonstration of a predominant probability of such future damages, which is something many plaintiffs already fail to do, especially if the defendant himself has actuarial expert advice.
by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm
by courtesy of
www.experten.de (published in the ExpertenReport 05/2019, page 62-63)
www.experten.de (published on 29.05.2019)
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About the author
PhD, MBA, MM
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.
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