Alliance rushes forward
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Allianz has said goodbye to the 100 percent premium guarantee in life insurance. From 2021 on, Germany’s largest insurance group will only offer contracts with a 90.80 or even only 60 percent guarantee. Existing customers are not affected, but it is also clear that other insurers are likely to follow suit soon. Niels Nauhauser, financial expert at the Baden-Württemberg consumer advice center, explains what this cut means for customers.
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So far, life insurers have at least guaranteed the premiums paid at the start of retirement. Allianz will no longer do this for new contracts from 2021, but it promises its customers more opportunities. Is that good news or bad news?
Nauhauser: It simply means that providers offer their customers less security but still charge the full cost. Whether the customer benefits from it depends largely on the development of the capital markets. The insurer does not have this in hand. Why should one get involved in something like this?
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Insurance is “not the first choice”
Because of the promised opportunities, as insurers can now act more risky?
Nauhauser: Anyone who wants to take advantage of the opportunities offered by the capital markets and is prepared to take the risk of loss can save the insurer’s costs. With a 90 percent premium guarantee, a portfolio of 80 percent bond ETFs and 20 percent globally diversified equity ETFs is comparable – but it only causes a tenth of the costs. The insurers only invest the money in the capital market. Because of the lower cost, a much larger portion of the income stays with the investor, which is only fair as they bear the risk. To build up retirement assets, unnecessarily expensive and complex insurance is not the first choice.
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How can one better regulate old-age provision?
Nauhauser: A distinction must be made between asset accumulation and asset depletion in old age. There are many alternatives for the structure. An ETF savings plan requires the composure to sit out the ups and downs of the stock markets. The insurance can only use its advantage at the beginning of retirement. Because their annuity is paid for life. With a payout plan, on the other hand, the saved assets will sooner or later be exhausted.
It should be noted that until the age of around 93, insurers usually just pay out the money they received. We therefore always advise you to check whether you can still pay into the statutory pension insurance. There, the pensions for the same money are significantly higher.
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Couldn’t it be worthwhile to quickly take out a policy with a 100 percent premium guarantee?
Nauhauser: No. Insurance sellers who live on commissions like to take advantage of changed framework conditions, for example when the guaranteed interest rate drops or, as in 2004, the tax exemption ceases to exist. The needs of the consumer are mostly irrelevant.
I would not be surprised if one or the other representative is even encouraged to persuade customers to switch from high-interest old contracts to new, allegedly more promising contracts. Anyone who still has a contract with two percent interest is well advised to keep it.
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So you don’t see any chances through the capped premium guarantee?
Nauhauser: Yes, for the owners of the insurance companies. The reason for this product innovation is the fact that capital market income is no longer sufficient to generate costs and the targeted profit margin for the insurer. In this respect, the lowering of the premium guarantee does not serve the customer, but simply to maintain the business model.
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Present value calculator
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Independent pension advice
Deutsche Rentenversicherung will advise you on your retirement provision – free of charge and completely independently. Jacqueline Müller from Deutsche Rentenversicherung Hessen explains what you need to bring with you.
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