Insurances - Higher interest rates for pension savers
After years in the doldrums, pension savers can once again expect higher interest rates on life insurance policies. "The trend is pointing upwards. Many providers are taking this step," says Lars Heermann from the rating agency Assekurata.
The first insurers, including industry leader Allianz Leben, have already raised the current interest rate for the coming year. "The interest rate is back. All offers are benefiting from this," says board member Volker Priebe. However, consumer advocates see "room for improvement".
"A clear signal"
Insurance expert Heermann expects an increase in the current interest rate from the guaranteed interest rate and profit participation to an average of around 2.45 percent for classic private pension insurance policies - after 2.2 percent this year. "That is a clear signal after a rather hesitant upward trend this year," says the expert. For products with a reduced guarantee, the current interest rate could rise to 2.5 percent.
However,Lars Gatschke from the Federal Association of Consumer Organizations sees "still room for improvement. You now get more for call money than for profit participation." In his view, an important reason why things are not moving faster is the capital buffer - known as the additional interest reserve in technical jargon.
Life insurers had to build up the buffer during the interest rate slump in order to secure the high promises of up to 4 percent for old contracts. This money could not be paid out to customers. "There would be more in the reduction of the additional interest reserve if it could be released more quickly. Customers could benefit from this in terms of profit participation," says Gatschke.
Lengthy process
Expert Herrmann sees the increase in the current interest rate as a rather lengthy process. "Insurers cannot completely turn around their long-term investments overnight." A large part of the insurance companies' money is in comparatively low-interest bonds with good ratings and long maturities from recent years. Their market value has fallen due to the sharp rise in interest rates.
This has created hidden liabilities on balance sheets. If the insurers had to sell the securities before maturity, they would make losses. Heermann believes that the probability of large-scale loss-making sales is very low. However, the hidden burdens would force companies to be cautious.
The current interest rate is made up of the profit participation, the amount of which is decided by the insurers depending on the economic situation and the success of their investment strategy, and the maximum actuarial interest rate set by the Federal Ministry of Finance - also known as the guaranteed interest rate. The current interest rate only relates to the savings portion after deduction of acquisition and distribution costs, among other things. The final surplus is added at the end of the contract term.
Increase in the maximum actuarial interest rate recommended
The influential German Actuarial Association is proposing that the maximum actuarial interest rate of currently 0.25 percent be increased from 2025 for the first time in decades - to one percent. Any change will only apply to new life insurance policies. For old policies, some of which still yield 4 percent, nothing will change in this respect.
The maximum actuarial interest rate is intended to prevent companies from overreaching themselves with guarantee promises. They are allowed to offer less, but not more. However, since the interest rate slump, most life insurers have only been offering products with a reduced guarantee in new business.
Actuaries are actuaries who use methods of probability theory and statistics to evaluate financial uncertainties in insurance policies.
Read also:
- Consumers in Germany may find improved old-age provision opportunities due to the trend of higher interest rates on life insurance policies, as stated by Lars Heermann from the rating agency Assekurata.
- Industry leader Allianz Leben is one of the first insurers to increase the interest rate for the upcoming year, according to board member Volker Priebe, benefiting all offers in the sector.
- Lars Gatschke from the Federal Association of Consumer Organizations still sees room for improvement, noting that consumers get more for call money than for profit participation.
- The slow increase in the current interest rate is attributed to the capital buffer, a hidden liability created by securing the high promises of up to 4% for old contracts during the interest rate slump, according to insurance expert Heermann.
- The maximum actuarial interest rate, set by the Federal Ministry of Finance, could see an increase from 0.25% to 1% for new life insurance policies by 2025, as proposed by the German Actuarial Association.
- With Frankfurt on the Main being a major financial hub, consumers should be proactive in analyzing their insurance options to take full advantage of any improvements in interest rates and old-age provision offerings.
Source: www.stern.de
