Riester Rente vs. other pension schemes

230 posts in this topic

Hi - I guess you also tried to call me, right? Will return your call soon but will be late afternoon or early tomorrow.

Meanwhile here is a short answer: I do of course know the DWS plan without Zillmerung (make sure it is this one, because DWS offers RIESTER with and without Zillmerung and salesmen like the first better and might try to sneak it in). The downside is, as you say, the "fund-in-fund" concept or umbrella-fund concept where you invest in a black box and never exactly know, what funds are yours and how they perform. Stiftung Warentest once recommended UNionInvestment, which had a similar concept, but since during the crisis they switched now all investments (those already paid in before and the new ones) into bonds without the clients having a word to say, they have withdrawn from this recommendation. DWS is also shifting a lot into Bonds etc, which is why I like better an alternative where you pick one publicly listed investment fund for your Riester and stay with it for the time being.

 

Now, DWS, as far as I know, for the "without Zillmerung" variation does actually charge around 5% per month, which would be normal for good investment funds (except ETFs which come cheaper). Therefore I have abit of a gut feeling that you might have been offered the kind of RIESTER where general costs are deducted in full during the first 5 years and then some additional costs for fund management as suggested above are added on top yearly. I will check my own info and sources on DWS and get back to you, but it will take 24-48 hrs due to a huge workload right. But especially with RIESTER there is never a reason to hurry because you can always pay the contributions for past months even at the end of the year to get the full subsidies and tax returns. If someobody is pushing you on a RIESTER contract, he is selling and not advising...

 

So, first bit of advice: demand a clear cost information about the plan to see if it is one without or with Zillmerung, according to the VVG you are entitelled to getting that. Once you know that it is actually a plan without Zillmerung you have the numbers from, try to learn if these costs mentioned above are on top of the standard deduction of around 5% each month, which I believe is the case.

 

Cheerio

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.
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Hi - I guess you also tried to call me, right? Will return your call soon but will be late afternoon or early tomorrow.

Meanwhile here is a short answer:

Thanks, yes that was me!

 

 

I do of course know the DWS plan without Zillmerung (make sure it is this one, because DWS offers RIESTER with and without Zillmerung and salesmen like the first better and might try to sneak it in).

<...>

Therefore I have abit of a gut feeling that you might have been offered the kind of RIESTER where general costs are deducted in full during the first 5 years and then some additional costs for fund management as suggested above are added on top yearly.

Yes it is with Zillmerung - I have seen the full quote and costs.

 

 

But especially with RIESTER there is never a reason to hurry because you can always pay the contributions for past months even at the end of the year to get the full subsidies and tax returns.

Partly ok in my case, but my case is a litlte more complex than I'll discuss here, so perhaps it may be better to do one part sooner rather than later if possible.

 

 

If someobody is pushing you on a RIESTER contract, he is selling and not advising...

I agree, plus a general feeling regarding other investments he offered, and to which I said no to; which is why I called - I think perhaps you might be a better help over the long term:-)

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I would like to start a Riester saving plan and have no idea where to go for that. Can I just go to my Bank (Commerzban) and ask them abour this or are there recommended institutions for that. Thanks for your advices.

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Talk (PM) to Starshallow (Patrick Ott) and he'll set you right. Your bank/local agent will probably just try to sell you their product, which may or may not be any good (for you). There's loads of different sorts of Riester plans (Bank savings plan / "Fonds" (stocks) saving plan / pension insurance based on bonds or stocks / ...) so make sure you work out what the differences are and what you're getting into!

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Dear Starshollow:

I am contemplating to begin with the Riester Rente Plan. My situation is as foolows: Born in 1977 with one kids (born in 2009) and wife. We are also expecting another one in Feb 2010. I am originally from India but hold a German Passport and working at the Humboldt University of Berlin with a pre-tax salary about 40K Euros/year. My plan is to work in Germany for the next 5 to 7 years and then move on to India or to the US. I am wondering if Riester Plan would make sense for me specially in light of my toddler and the kid I am expecting. The total government subsidy may amount upto 908 Euros per year. I am also expecting an increase in my salaly by 5K starting in March 2010. I am being bugged by VBL to start with the Riester Rente Plan for almost two years now. Is it different from plans offered by different banks in terms of commission, fees and investment fund options?

 

Also, I would appreciate your input about the Wohn-Riester thing. Please do let me know your contact number. I am reach you in person. Thanks and Best: Nishith

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if you sent an official email to my business address then it is being processed now - sorry, we currently have a huge backlogg and I was down with a really bad cold since last Friday. If you sent me a PM or TT-internal email, pls click on our add and send an offical inquiry because we can not (for legal reasons) reply by PM to such inquiries..

 

Cheerio

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.
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Good evenming,

 

as an expat with 32 years local experience, an owner of Riester and various other "Pension plans" I would be more than happy to discuss the pro s and cons of Riester. The sort you finally decide on depends on your age and your risk profile.

 

After reading all the posts sofar there is not much else to be said. If you would like a chat, drop me a line jamesblonde1962@yahoo.de

 

JB

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Hello all and thanks again for theses high value information. My bank advisor is currently trying very hard to make me sign riester contract with them (commezbank in cooperation with Generali). What i find strange is that he tells me the bank will only charge 50 euro as administration cost and that will be all. How about Generali? I have the feeling there are hidden costs somewhere down the road.

Have anybody here any experience with this kind of contract and where will be the best place/offer to go for?. Of course i'm looking for a scheme without Zillmerung. Thanks in advance.

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If it in combination with GENERALI (an insurance company) it is bound to be with Zillmerung. Sometimes the salespersons try to wiggle out with the point that technically it is not ZILLMERUNG because the cost deduction is spread over the first five years instead of being deducted directly during the first 1-2 years, but it is still an up-front-cost-deduction and thus not to your advantage.

 

You can do two things, if you are uncertain/doubtfull about this, which from what you you write above you should be:

1. the bank is obligated by law to hand you a quote which shows the complete costs for the plan at one point in full EUR. The quote should also include the redemption values from year one to the end, based on 0% and other chosen % yields over time. There, too, you can see if heavy costs are deducted during the first years. Ask them to provide you with a proper offer and if they can't or won't do it, don't go back. If they do, check it out and you should be able to see if there is only 50 EUR costs or not. I doubt that, but there can always be surprises...

 

2. or you can send me (or any other independent advisor of your choice) whatever quotes you have already received for double-checking. A professional can usually easily detect if therer are costs cleverly hidden or not.

 

Certainly my best advice is not to sign anything before you fully understand what you'd be getting for your money. German banks are not exactly know to have their clients best interest in mind...

 

Cheerio

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.
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Thanks Starshollow, I'll send you the quote when i get it. Moreover, It's a "fonds" based system and does that mean they will invest my money in the stock market? They said the minimun intrerest rate, which is also fixed by law is 2.5%, in my case, they made an estimation with 6% (but this can change over time); is this realistic?

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If it is fund based (which is a good thing per se in my opinion) AND with interest guarantee, than it MUST be with up-front-costs. I am pretty sure about this.

With a good selection of investment funds a 6% p.a. yield over the entire time (assuming you still have 20-30 years to go til pension) is a fair assumption. The keywords in this phrase being: good selection.

this is where usually the plans you have been offered fail miserably, because they only offer a very small and poor selection of their own funds or so. Therefore it is crucial that you have a good and wide choice of many publicly listed funds to begin with an advisor who can select and manage this for you over time. My clients for instance who used the plans without Zillmerung last year with the fund I recommended (M&G Global Basics) made a profit of 17,38% in 2009 after costs - and on top of this comes the tax return and subsidy (Zulage). Of course there will be years when this will not grow as fast and strong, but we are talking average over time and on top of that with monthly contributions which means you'll also enjoy the "cost average effect" in your favor. So, 6% is a fair assumption but only with the right selection of funds.

 

Cheerio

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.
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Hi readers.

 

the DWS Riester Rente plans can be "sold" at nearly no cost - a nearly 100% cost cut of all selling costs is availble.

This 100% rebate ist possible for the DWS TopRente and for the DWS Riester Rente Premium.

 

Both investments are good solutions. The new version DWS RiesterRente Premium ist a leading and very diversified investment which is a very reasonable solution. Of course much better if you receive a full rebate of the "Ausgabeaufschläge" of 5%.

 

Danny Bauer, Erlangen

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Hi readers.

 

the other possible solution for investment gurus is a ETF-based Riester with the possibility of a cut of all selling costs too.

 

This 100% rebate of course is connected to a investment into ETFs - which usually never any have costs named Ausgabeaufschlag.

 

Danny Bauer, Erlangen

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HI Danny, only one of the two DWS Riester plans you mention is without "Zillmerung", i.e. without upfront cost deduction during the first five years (TOP RENTE is the one without Zillmerung). I would strongly advise Expats (and everyone else for that matter, just check the recommendations from FINANZTEST on that matter) only to use the one without Zillmerung. Personally, what I do not like about the DWS plan is the blind pool investment, i.e. they invest into different DWS funds (among which are some pretty good ones, no doubt about that) but you have no say in this matter. Same what put me off with Union Investment, where they also shift the investment as they want and not as you want. The Union Investment RIester was a top recommendation by some for some time before the financial crisis, but then they sold of way to late the depreciated funds and turned everything into bonds and have just only now started to switch back, thus missed some good opportunities. I rather prefer investment/Riester plans where I as the advisor or you as the client can chose directly what fund(s) you invest in.

 

I must admit I don't know any plan based on ETFs without Zillmerung- if you know one I would be glad for a hint, never too late and too old to learn something new. ETF investment has its pros and cons, usually more pros, I give you that. But they key issue remains the upfront cost deduction which is to be avoided.

 

Cheerio

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.
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Not wishing to criticise the advice from starshollow et al., but if you plan to leave Germany (whether temporarily or permanently), editor bobs's advice is probably the best:

 

go for a pension plan that FOLLOWS YOU around the world, not one that restricts you to any country or region.

 

And make sure you can cash up the whole lot to invest elsehwere rather than being restricted to monthly pension payments only.

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I'm sure Starshollow would not recommend Riester Rente to someone that was only planning on staying in Germany for a year or so, however your suggestion of investing in an international pension fund misses one of the main benefits of Riester Rente which is the fact that your premiums are tax deductable. For people at the top end of the tax scale, that means that they are basically getting a 50% free investment from the government with Riester Rente.

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Onemark: first of all, critizism is good - it helps us to get better. Like Bobby Jones once said: I never learned much out of a tournament I won, only out of those I lost...

 

You are correct that anyone who just stays a year or so would not be well served to invest in a RIESTER plan in any way or form. But already with 3 years or so, this starts to make sense. On one hand because of the tax benefits and direct subsidies Hutcho mentions which make for a tidy profit, somewhere around 30-40%. Now, with the EU supreme court decision in the back, in contrast to the past, you can even keep these subsidies if you leave Germany again (as long as you keep the money resting in the plan). If you just leave the money behind and let the funds continue to grow, just from compound interest you'll make a lot out of that money. If at any time before pension age you decide to cancel your plan and cash in - which you are free to do - you'll have to repay the tax returns and subsidies, but only the exact amount that was aloted to you (which has diminised in value over time due to inflation) while you may keep all the profits generated with that money. That is a great deal for everyone - and all the time you can decide when to cash in or if you just leave the money til pension age.

 

The international plans I know all have one major downside (as was discussed elsewhere already when talking about the "offshore pension plans"): they come with huge intial cost loads where you pay between 2 and 3 years in such plans just for costs and commissions before your money is actually invested. There are, unfortunately, no such plans available without "Zillmerung", the more is the pity. Hence I am very hesitant to recommend them unless someone really leads a totally nomadic lifestyle and this is the only way to set him with some pension plan.

 

Cheerio

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.
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And make sure you can cash up the whole lot to invest elsehwere rather than being restricted to monthly pension payments only.

Just an afterthought: I once thought like you to this regards. But over time I have simply seen too many people coming to crossroads in their life and then "cash in" their pension plans only to find later that the money was gone and no pension left. Either because during a midlife crisis they squandered the money or during a business crisis the used to money to keep some business afloat which went belly up eventually anyway.

It is in my opinion now a good thing if there are certain funds put aside for old age that neither you nor any third party can touch til pension age. That way the temptation is greatly reduced to misallocate this money at any time in your life. This can actually save people - even though it may take away some freedom and flexibility.

 

Cheerio

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.
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starshollow:

 

First of all, I was not criticising your opinion. I am not a finance professional and would never presume to exercise such criticism. To that extent I have no problem with your arguments. And I am certainly not knocking Riester or Rürup pensions. They ARE good if that's what you want and if they fit in with your personal requirements.

 

My intention was merely to add another aspect to the debate - no more.

 

A pension scheme that follows the payer-in around the world is ideal and I imagine - feel free to correct me here - that a Riester or a Rürup pension would not be the ideal solution.

 

I am in various plans which allow me the option of collecting the whole lot in a single capital sum as I will probably not be retiring here in Germany. For me, a Riester or a Rürup pension would not, therefore, be the ideal way to go.

 

Are we clear on that?

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