New Retirement Savings Account Attracts Interest, but Requires Further Explanation

Starting in 2027, the government-subsidized retirement savings account will replace the Riester pension. In the future, citizens will be able to freely invest their savings in funds and ETFs (exchange-traded funds). But how is the model being received? A survey of 1,726 investors led by Kassel-based economics professor Prof. Dr. Christian Klein shows that while interest is high, there is still a significant need for action to ensure that people understand the reform.

Prof. Dr. Christian Klein (pictured) and researchers in his department studied the acceptance of the new retirement savings account.

The responses show that three out of four respondents can imagine using the new investment account. However, the majority actually prefers the option with a guaranteed contribution. This, however, would reduce the potential for returns—people would effectively be taking out contracts based on the old Riester model again, which is precisely what the reform is intended to prevent, Klein points out. In addition, about two-thirds would like a sustainable investment. Whether the planned standard investment account will meet such criteria remains entirely unclear at this point. The fact that nearly one-third of respondents had never heard of the reform underscores the urgent need for public education.

For the next phase of the reform process, the researchers outline four recommendations in the policy brief:

Make public awareness and financial education part of the reform from the very beginning.
Make the return costs of guarantees transparent, for example through mandatory sample calculations before signing a contract.
Embed sustainability in the standard portfolio—with an opt-out option for anyone who does not want it.
Examine the possibility of increased government subsidies for sustainable products.

However, there is little time left before the launch in early 2027, according to Klein, head of the Sustainable Finance department at the University of Kassel.

About the study:

The policy brief was published on the Sustainable Finance research platform. The survey was conducted by researchers from the University of Kassel in collaboration with the University of Paderborn, with funding from the Mercator Foundation. From the University of Kassel, Prof. Dr. Christian Klein, Dr. habil. Bernhard Zwergel, Dr. Maurice Dumrose, Torben Steinbrecher, and Dr. Daniel Engler from the Department of Sustainable Finance contributed to the study. Also involved were Prof. Dr. Marco Wilkens (University of Augsburg) and Dr. Gunnar Gutsche (University of Kassel / Visiting Professor at the University of Paderborn).

Read the policy brief “The New Retirement Savings Account: What Private Investors Want.”

Contact:
Prof. Dr. Christian Klein
, Head of the Sustainable Finance
Division, University of Kassel
, Phone: +49 561 804-7565
, Email: klein[at]uni-kassel[dot]de

What does this mean in summary?

High interest, but gaps in knowledge: Three out of four respondents are interested in the new retirement savings account starting in 2027, yet three out of ten are not even aware of the reform.
The majority of respondents prefer a full contribution guarantee—that is, the model with the lowest potential returns. This would effectively mean that people would once again be entering into a type of Riester contract, which the reform was actually intended to prevent.
Need for political action: The research team calls for mandatory disclosure of guarantee costs by 2027, the inclusion of sustainability criteria in the standard portfolio, and the consideration of higher subsidies.