After months of preparation, the Federal Ministry of Finance has presented its plans for a private retirement savings account. Thomas Soltau, head of the neobroker Smartbroker, followed the process closely. He is positively surprised by the design – and explains what the depot could look like in the future.
When Thomas Soltau made a LinkedIn post on Wednesday, he didn’t skimp on superlatives. “Now it’s getting serious! Now comes the game changer for Germany!” wrote the boss of the online broker Smartbroker. Soltau informed his followers about the draft law for the state-sponsored retirement savings account, which the Federal Ministry of Finance published at the beginning of this week. A “milestone” for Soltau: He “never thought that 113 pages full of paragraphs would be so exciting,” wrote the manager continues.
Mr. Soltau, you wrote that you never thought “that 113 pages full of paragraphs would be so exciting!” What was so exciting about the draft law for the retirement savings account?
A design like this always involves a lot of guesswork. What is really left of a good idea when politicians and industry representatives sit together for months? Usually not that much. The so-called focus group has been discussing the state-funded retirement savings account since November last year. That’s why it was very exciting to see what was ultimately implemented. Now that I have read the draft, I have to say: I am really positively surprised.
Make it concrete with an example.
One concern was that the retirement savings account didn’t offer enough variety. Example: Only green and sustainable financial products or shares from companies based in Germany may be saved. Fortunately, neither is the case. Consumers will be able to freely choose between many different investment products – from broad-based ETFs to government bonds to individual stocks in a US tech company. The funding rules are formulated quite clearly.
Do you mean the maximum amount of 3,000 euros that consumers can invest annually with government funding?
Exactly. For every euro that a citizen pays in, the state will add 20 cents – up to an annual personal contribution of a maximum of 3,000 euros. The state therefore adds a maximum of 600 euros. From 2030 onwards, 3,500 euros can be paid in per year. For us providers, this limit is a challenge, as the retirement savings accounts will initially only be very small. This increases the costs relatively. But the rules are good and understandable for consumers – that will help make the project a success.
What will the retirement portfolio look like with brokers like you?
It must be an independent depot. This means that consumers cannot simply continue their existing savings plans with government support. You have to set up your retirement account separately with your broker and save in parallel to your current account. We then display both in a common overview.
And what if I already have another pension product? For example a Riester contract?
Consumers will be able to save more money. Alternatively, you can transfer the capital you have already saved into a retirement product of your choice, including a retirement savings account. A portfolio transfer is usually free, but according to the draft law, the maximum limit for such a product will be 150 euros if you change in the first five years. After that it’s free. This is intended to avoid constant depot changes, which is also harmful to providers.
As a neobroker, you will definitely still target Riester savers.
There are currently around 15 million Riester contracts in Germany, which is undeniably an exciting target group. Basically, however, you shouldn’t talk down other financial products in marketing. The Riester pension was certainly not the big hit that was hoped for, but there are definitely contracts that have brought good returns. Do we still believe that retirement savings accounts are the better choice? Certainly. Will pension products with guarantees disappear completely? I do not believe that.
You mentioned the costs. Will the retirement savings account remain free?
The costs will not be much different than what we already have today. Savings plans in particular will get a further boost from the retirement savings account. We try to ensure that these remain largely free. But it doesn’t just depend on us. For example, if payment-for-order flow is really banned and also applies to ETF savings plans, we could be forced to charge smaller fees. This would also affect competitors such as Trade Republic or Scalable Capital.
Consumer advocates complaineveryone can now speculate with state support in individual stocks. This will only increase the scene of dubious financial influencers and structural salespeople.
If you remember what went wrong with the introduction of the Riester pension, the criticism is not unjustified. For insurers, the past 20 years with the Riester pension have been a gold mine, especially when it comes to dealing with costs. There will continue to be consumers in the future who need advice and will pay for it. Black sheep cannot be completely avoided. Overall, however, the retirement savings account will advance the market. There will be a strong shift from structural sales to neobrokers, which will increase transparency. To this end, the Ministry of Finance is planning a comparison platform where all providers must list their offers according to costs.
Nevertheless, many consumers have not yet overcome the Telekom trauma. Does it make sense to promote the purchase of individual shares by the government?
I think banning the purchase of individual stocks out of fear of losses is the wrong approach. Of course, this will be an issue that we as providers will have to deal with in terms of communication. There’s also a lot about financial education offerings. We have to make it clear to consumers that a portfolio consisting of several stocks or ETFs is the best building block for stable provision in the long term. By the way, the federal government has already recognized this problem. There will be so-called reference portfolios, i.e. predefined mixed portfolios from asset managers, for example, which unsuspecting investors can save on request.
So far, only around 18 percent of German citizens own stocks or funds. Are you expecting a new boom with the introduction of retirement savings accounts?
I already wrote it: The retirement savings account will be a game changer. On the one hand, this is due to the attractive subsidies from the state, but on the other hand, many millions of people will sooner or later be confronted with the offers. There was already a huge momentum when the Riester pension was launched, and now it will get even bigger thanks to social media and influencers. The neobrokers are facing a Corona boom 2.0, so to speak. I assume that the share quota can double over the next few years thanks to the pension portfolio.
