Riester Rente vs. other pension schemes

228 posts in this topic

onemark: you are entirely correct - it would be great to have good pension plans which follow you around. The finance/pension plan industry - especially in Europe - has somehow not yet understood the need for that i a globalized economy with very mobile workforces. there is still nothing there that really works well because the offshore pension plans I know are simply too expensive in comparison for the client/investor. it would make more sense then to build up just your own investment portfolio out of investment funds, bonds and stocks and all which you can move around with you instead.

 

Ref RIESTer and RÜRUP: they can't indeed "follow" you - but you can continue to pay in from whereever you live (albeit you'd have to keep one German bank account up and running) and you can draw the pension later also wherever you live. Question is if you'd do that if where you go/live much more attractive tax subdizied plans are available... therein lies the predicament for mobile Expats - and which is why these offshore pension plans are sold so often as a good idea even though they are more or less only a very good idea for the people selling them (because of the extremely high costs/commissions involved). If one of the offshore pension plans would be offered with costs going pro rata, that would be a great thing. Perhaps I'll try to launch this one day with GENERALI or any of the others located on the Channel Islands...

 

Cheerio

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

 

Does anybody have experience with using Wohn-Riester plans to buy a house? We are having trouble figuring out exactly how it works... What we think happens is that if you take a loan from the Riester scheme then you carry on making the saving contributions and then make additional repayments at the interest rate of the particular bank? Then something weird seems to happen, like the interest rate is initially high (e.g., around 4%) then after 10 years it is low (e.g., around 2%)? Can anyone shed light on this please?

 

Thanks!

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hi Neuseeländerin,

 

you might want to call me under 09131-9209088 - I can explain to you how this works with the Riester - Bausparvertrag for buying a house.

 

- but there are lots of possible problems if you perhaps move on during the next 20 years and do not stay in your Riester-Bausparvertrag financed house for this about 20 years time.

 

Danny Bauer (danny.bauer@usa.net)

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heuseeländerin: first you have to differentiate between a Wohnriester-mortgage (Darlehen) and a Wohnriester-savings&loan-plan (Bausparplan)

 

The WohnRiester mortgages have recently been critized by, for instance, consumer protection agencies and the Finanztest, because the mortgage interest rates offered are way above the best interest rates you can get on the market from banks without the direct connection to a WohnRiester

 

The WohnRiester savings&loan-plans (Bausparplan) have also been correctly critized often enough for too much initial costs at signing and too much intransperency with regards to the total costs and also the rela, effective interest for mortgages later when you can draw them. The most recent issue of the monthly Finanztest for February 2011 shows that the effective interest rate with these plans can often be very bad in comparison to "normal" mortgages and therefore you would need really good, professional and independent help to find if this is working for you.

 

On top of that there is a taxation issue later in life if you use RIESTER for a property. Because you use tax subsidized pension capital you will have to pay taxes on the monetary value of the property financed with this once you reach pension age. How this is exactly going to work is still under dispute and as a professional financial advisor I do not like to point people in a direction that leads towards an uncertain tax situation, especially during retirement.

 

So, I would rather advise you to use a RIESTER savings plan with a bank if you are very adverse against any form of risks or a Riester Fondssparplan (investment in mutual funds WITHOUT Zillmerung, i.e. without frontloaded costs) if you like to give a higher yield from stocks and bonds a chance.... and then decide later in life if you use the money to pay for part of the then still existing mortgage or not. Both options have not such high initial costs for you (which is why most salesmen-calling-themselves-advisors won't offer them to you) and keep you more flexible along the run.

 

Yes, you should enjoy the RIESTER benefits if you can (i.e. if you are an employee or civil servant or married to one) but unless there are special circumstances - which is exactly what an independent advisor/broker would have to analyze for and with you - I would recommend to stay away from Wohnriester and go for the best available mortgage on the market and use a normal Riester to build up capital that CAN be used to reduce your mortgage burden later in life but is not locked in for that right away.

 

Cheerio

 

PS: Danny - if you have some solid and good information, share it, that's what this forum is all abou- your contribution is a bit lame and just seems like trying to catch some clients the cheap way.

According to your website http://www.clc-finance.de/ you are a really an independent broker and financial advisor - something to be proud about in contrast to all the tied and multi-tied agents! Why not say it out loud - we can always use more independent and fair advice here! And while there are a number of active and trusted independent advisors here on Toytown, advertising and giving free advice - there is always room for more, so why don't you join them both with advertising and giving free advice in the Forum?

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.
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Thank you both Danny and Starshallow!

 

First, just to say that I did take up Danny's kind offer of phoning and I can see why he suggested that because Riester Bausparplaene are very complicated and it would have probably taken quite some time to write it all in an email. He was also very clear in saying that he didn't want to sell anything, that it was just advice. In other circumstances you might have been quite right to be suspicious Starshallow, but here I think that the motives were about helping.

 

Also, thank you Starshallow for describing the risks of a Bausparplan. I wish we had known earlier, we thought that it was more simple than it actually was and ended up signing for a plan at the Postbank on Thursday. In Germany, does one have an out from contracts (e.g., in NZ I think that one has seven days to change one's mind)? It still looks like a good enough plan, but it was not quite what we thought (e.g., a fee of 1200 euro, I'm not sure that that was made clear) and we, with hindsight, felt a bit rushed into it. We sort of thought that, like in NZ, you can trust people at banks... when will we learn???!!!

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Neuseeländerin:

1. with regards to your Bausparplan: you always have a cooling of period of 14 days and I would indeed strongly recommend to cancel it. If they give you any fuss about this, I am sure it can easily be found in the info documents, quotes etc they have given you that they did not disclose the costs and other things properly. The consumer protection agencies accross Germany have taken them and others to court for that repeatedly and they still don't learn. Theirs is entirely a selling business and I sometimes pity the poor sods working there because they are under so much sales pressure. But my pity is somewhat limited because I see too often how badly people are getting conned there (and Postbank is not better or worse than the rest, mind you) and that is especially true with regards to ExPats

You can do the cancellation in writing, you don't even have to go there. If you don't know how to do it, I myself or someone else like me can help you - or just take this to a "Verbraucherschutz"-office near you, they'll also help you with that.

2. with regards to Danny: I checked his other (unfortunately few) contributions on TT and am also convinced from what he writes that he is one of the good guys. It just has a bad taste they way he wrote this because this method is used by too many of the wrong people... From his legal status and the few things I was able to read I have so far a positive impression and would therefore truly welcome if he'd advertised here too and would offer more free info on Toytown in this forum - the more professional people do this the better the quality and also the choices for potential clients. Since you already got his advice on the phone you might want to ask him to help you with the cancellation of the Bausparplan and let him help you to set up a good cost-efficient RIESTER plan instead. If he works like me he could also assist you in finding a good mortgage and then take you thru a number of other important issues, like a term life insurance if you have children, or a decent income protection against long term disality for the main income earners in your family to make sure that your whole ship does not flounder in a simple financial storm if an accident or, more likely, an illness takes one of you out of work for considerable time. When you plan to buy property you should get full financial advice to make sure that all important facts are properly dealt with

 

Cheerio

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.
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Thank you once again Starshallow for this very useful information. I think that we will definitely terminate the Bausparplan, if for no other reason than on principle! As it happens, there are good reasons too! (pointed out by yourselves)

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The more good guys - decent, independent and customer-friendly advisors - the better. If danny-bauer is one such guy, please write on here more often, danny. MOST expats don´t know where to get HONEST advice ( actually, most Germans don´t either ),

 

The market to help English speakers is there and I´m always willing to recommend other independent thinkers/doers/advisors working in areas I don´t want to get involved in ( not enough time, not enough specialist knowledge, not enough energy ).

 

Make client service the goal.

I am a professional independent insurance broker and authorised advertiser. Contact me.
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usually the Postbank sells BHW Bauspar-contracts (they took over the BHW some time ago). I just checked the standard contract online and there is a "Widerruf" clause there like in any other contract which give you 14 days to step back from the contract in writing (important!! in writing!!) and the period for stepping back starts with the day you have been handed your copy of the signed contract or even with the final policy (that can differ). Be that as it may, you are fully in your right since you signed only two days ago to cancel this during next week.

I would advise a fax PLUS a registered letter.

 

moz-screenshot-3.pngpost-8763-1296331923384.jpg

 

Cheerio

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.
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Dear Neuseeländerin and dear starshollow and john g. and others,

 

I do agree - thanks for the flowers ... I do know and experience quite sometimes that my way of giving free advise is unusual.

 

I love to give free and good advise how to reduce unneccessary costs and find ways to find a get around nearly all costs with the Riester or other contracts.

Most advisors or bank clercs just want or try to sell procucts or contracts. There is nearly no honest consultant (that a usual customer can find) who does not want to sell products or contracts or clearly and openly speaks about all costs and hidden costs and tries to help in finding a way to be as good informed as possible. In my view this is the only way I would like to receive consultancy. Absolutely open, clear and independent - not aiming at the sale of a prdoduct or contract e.g. a Bausparkassen-Riester ...

I try to help where possible - but time is limited - so I do not write very often - the phone ist much quicker for the first information about advantages, disadvantages, problems, flexibility options, tax effects, costs and ways to compare different products or solutions easily.

It is quite difficult and one needs a lot of time AND KNOWLEGE - even for "IFAs! (independent financial advisors) this is not easy.

 

Everybody can feel free to contact me.

 

Yours danny

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Danny: we seem to agree on a lot of issues here... If you take some time to check the many comments I wrote here you'll find that I, too, advertise strongly to use only RIESTER plans which do not come with huge upfront costs like 99% do. And for that matter everywhere else where possible I recommend to avoid the Zillmerung where possible because it is only meant to feed the greedy salesmen and not in the best interest of the client. There are a couple of good RIESTER plans out there without upfront costs ( you have alread mentioned elsewhere the DWS plan, there is also Union Investment and Comminvest/Ebase) and in most cases people are better of if they use those instead of the ones where they pay the full costs for the plans with a serious share of their contributons within the first five years.

So, as the American would say (sorry, stayed too long over there I guess): we are on the same page to this regards

 

Where we seem to differ is how we spread the info. I agree: the full details of advice can only be given in an intimate and very personal conversation. However, the basics - which is more than the majority of people and even advisors know - can and should be spread openly and publicly and there is no better way to do this for Expats than here on Toytown. Which is why I (and john_g and some others, too) spend so much time in writing info and comments here. I think an independent advisor like you and me has the both the privielge and the responsiblity to protect as many people as possible from getting conned by the wrong kinda guy, which - in a barely regulated market - make up for the majority of people calling themselves financial advisors when they are only salesmen at the end of the day. I accept that quite a number of people who read my comments won't come to me just because I wrote them. They will take the info elswhere and another advisor/salesmen might acutally benefit from this. But my business is still doing extremely well and I can afford that this happens... as long as the bad guys loose, everybody wins from where I stand.

You seem to be a very knowledgable person- so, if you can spare the time, give some of your knowledge to the Expats community, it is rewarding in many ways...

 

Cheerio

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

 

Thanks for the helpful info on pension schemes! This thread seems to have gone cold, but I wanted to see if I can bring it back to life. I am 26 years old, single, no children, and am looking to put some money away into savings, but it was suggested that I start a private pension fund instead. I don't plan on being in Germany much beyond the next few years, (it's possible I could stay 3,4,5 years - but for now my contract only goes 2 more years,) and assume I will eventually settle back in the U.S. for my golden years (or sooner.)

 

I guess all of this information is a lot to take in for a beginner with very little experience in economics and investment schemes, but who anxiously wants to put small amounts of money in a safe place for later use. I've read all the info on the Riester Rente and realize there is always the option to go with a private bank, although they may have an alternative motive to helping me save money. But I wonder what about international pension schemes such as Fidelity? Is it even possible to feed money into a pension fund building up in another country? Or can I only contribute in the country where I currently live? Or maybe paying into a fund in Germany really makes the most sense after all, so long as I don't get screwed on the Currency Exchange Rate when I decide to pull it out and possibly move it to dollars.

 

Or if I am talking about a small contribution each month, (a couple of hundred a month,) is a "Tagesgeld" or other savings account really a better option since I can withdraw the money whenever necessary, (say - to move,) but still allow a little bit of interest to accrue.

 

Anyway, this thread may be beyond revival, but hopefully some of your knowledgeable folks are still around ;-)

 

Thanks again for all the info so far!

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I'm sure others will be along to answer your questions soon but in the meantime I wanted to thank you for dragging up this thread again as I had one more question I forgot to ask John G. when I spoke to him a few weeks ago and I actually found the information in the above (and I should have known it already because I know I've read this thread before).

 

For what it's worth one thing it is important to remember to do is if your salary goes up, you think about checking if you should adjust your Riesterrente payments as well in order to get the maximum tax breaks. It's currently €2,100 per year OR 4% of your gross annual salary (and John G. or Starshollow will come along and correct me if I've gotten this wrong, I'm sure).

 

I set my Riesterrente up a couple of years ago but didn't think to put a reminder anywhere to do a review in a year or so. I'm the kind of person who will do the research or get advice in order to make a decent decision at the time but will then put the whole thing out of my mind (since it has been 'taken care of'), which is not really the best way to be when it comes to finances. You really do need to at least put the effort in to checking everything over once a year. So I haven't been getting the maximum tax benefit for my contributions because I hadn't taken salary increases and bonuses over the last couple of years into account. Not talking about large enough sums to make a huge difference but still...rather me having it than the taxman.

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Hello all,

 

I am in this situation myself now, and I need to make a decision about the DWS Riesterrente Premium. I have read up a lot in the past few weeks to try and figure out what the best option is for me, and while I know a lot more now it is all just very murky and confusing.

 

I want to start a retirement insurance plan ASAP. I will, at some point in my life, be able to make use of the "Förderung" through Riester, but cannot at the moment. Because I want to be able to make use of the Förderung when the time comes, and the earlier you start a pension plan (and especially Riester) the better, I want to go for a Riester contract now. Does this make sense or should I go in a completely different direction? I don't need the actual solution, just to know whether my current plan is a decent compared with what is available.

 

I have been told that the DWS Premium through Zurich is one of the best options for a great investment system plus government funding plus retirement insurance. And from what I have read around the net, it does not seem to be such a bad option. Considering that I am not very investment-savvy I think that this "motor" system they keep talking about (as badly named as that is) could be the right thing for me, i.e. the safest bet. Again, just want some direct opinions on whether I am making a fool of myself, or whether at this point it is simply a matter of choosing and going for it.

 

Any comments would be helpful.

 

Sincerely

d_mat

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Evening, d_mat! ( Doormat?? :)

 

Well, I commend you for thinking about the future - there´s no way around setting up something for your old age...BUT:

 

please consider the dangers in life which may happen BEFORE you retire:

 

Have you sorted out liability insurance/private Haftpflichtversicherung? This comes before everything else ( apart from health insurance ). And it´s cheap!

 

Second comes- before- everything- else: have you sorted out some kind of income care plan? ie you get really sick long term or have a terrible accident and can´t work, let alone continue to pay into a pension plan.

 

Finally, how do you know Riester is the right thing for you? It might well be the best..but it might not.

 

In my humble opinion, you would be well advised to consider your WHOLE situation first!

I am a professional independent insurance broker and authorised advertiser. Contact me.
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Living in Germany and doing a PhD I have to have health insurance (not that I wouldn't if I didn't have to).

I also have liability insurance, so that is covered.

 

I think that the main points that are positive for going for Riester, i.e. start early, have kids, be able to get "förderung", good income, will apply to me at some point in my life, and hopefully for some time. Only the start early part applies now. And although I may move out of Germany, I do plan to spend a significant portion of my life here and can keep paying into the plan from wherever I may be in any case.

 

To clarify on the point of why this is important right now... I was made this offer September 2011 and was told that setting it up in 2011 is important because of the change in the law in Jan. 2012. Of course I completely forgot to work on this stuff to make a decision, and finally signed the contract end of December... but ONLY because I was told that I would have a month to cancel if I decided it wasn't for me and that at least this way my contract would not be in the 2012 category if I do decide to stick with it. So I want to/need to decide by next week whether I stick with the contract or not.

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d_mat: what you have been told is mostly nonsense and sales-pitches, I am afraid.

Currently you do not pay taxes, thus you do not benefit from RIESTER plans at all. The only thing you lose when you do/did not start such a plan in 2011 is that the contractual min duration of these plans has now been increased from end age 60 years to end age of 63 years. In a time when we are discussing having to working til age 70 or so, this is not really much of a problem as far as I can see. And certainly no problem as big as to make you pay into a heavily front loaded plan for 1-2 years now with no actual tax benefits.

Cancel the contract and set up a RIESTER later when you actually profit from it - and in the meantime do some savings in investment plans (either managed or ETFs) to build up capital but stay away from things that cost you money and do not offer benefits to you but only to the advisor/"Berater".

 

Cheerio

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.
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Here is the very helpful information I received from Starshollow in the hope that it can help others as well! (copied with permission):

(Additional remarks by me are marked with =>)

 

Starshollow: Ok, couple of thoughts here: since you do not have to pay taxes in Germany yet, the benefits of a RIESTER for you somewhat escape me. While starting to save some money as early as possible in life is a good thought and actually quite important when looking at the long-term-effect of compound interest, the average RIESTER plans is way too expensive for you from the start. Out of your net investments every month you’ll be losing around 30% or more during the first 5 years for upfront-costs/Zillmerung, something you can’t recuperate even with the best possible outcome on the form of investment, I am afraid. I personally would never offer someone in your position a RIESTER plan (yet) – and if at all, then definitely only one without front-loaded costs. You’d be better served of putting your money into a simple investment-fund savings plan wih pro-rata cost deduction. You can use this money later to pay into a pension plan as a top-up or to build up capital for other forms of long-term investment such as property/real estate.

 

=> d_mat: I think that last point as an alternative to Riester/pension plan is very important for people in my position. Thank you!

 

d_mat: I was just offered a DWS Riester Premium through Zurich, through Deutsche Bank, through "Berater".

Starshollow: Funny how they always pick the most expensive plans for their clients, if you ask me

 

d_mat: That said, from everything I have read the DWS premium and riester in general get a bad name. However, the points that I am not clear on are the ones that I were now given in my last meeting (I did go for the plan before Christmas due to the changes in the law in 2012, but can still cancel till end of January).

Starshollow: Why and where would DWS Riester get a bad name – can you give me any source? The only bad comments I can find are from “Berater” who are pissed off for losing commissions when clioents go for the GOOD DWS Riester plan without frontloaded costs, the DWS TOP-RENTE. I’ll explain more later downbelow. The only qualms I have with DWS Riester plans (both) is that it is a bit of a blindpool investment, i.e. neither I as your broker nor you as a client have an influence on the selection of investment funds. Other RIESTER plans from, for instance, ALLIANZ or PRISMA-LIFE have an excellent free selection of investment funds and it is possible to use them, even though they are front-loaded, in a way that can still reduce the costs strongly, though not as much as with the DWS Riester plan TOP-RENTE.

 

=> d_mat: That impression about the quality of Riester plans comes from a general reading of german forums. But now it is clearer to me that what people have an issue with is that the law/system could have been setup better in the first place, but that as it is you should use it if useful TO YOU.

 

d_mat: I was told that the premium system is more likely to bring higher interest rates due to the "motor" system

Starshollow: This is, sorry to that so frankly, pure and unadulterated BS. The DWS PREMIUM and the DWS TOP-RENTE use exactly the same investment method, there is no inherent difference there to this regards. But if you compare the actual costs for each, not to mention the loss in compound interest effect from the DWS PREMIUM plan, you can see that the DWS PREMIUM is actually even more expensive. So, with both set-up and investment methods entirely equal or, as you may know better from academics “ceteris paribus”, the higher initial costs and costs over time in the PREMIUM plan are causing you a loss over the entire time. Just so that the bank/Berater make more money in the first years. Not exactly in your interest at all.

 

d_mat: the riester system is more flexible in terms of cash input than others (=>I can change what I pay-in month to month).

Starshollow: The flexibility is also a bit of nonsense in the way it has been presented to you. On one side there is a clear YES: yes, you can increase and reduce your premium payments to a RIESTER plan basically from one month to the next. But you can do this with virtually every other form of investment or pension plan I know of. However, there is also a clear NO side to this: NO it is not really flexible because you lose big money if you start higher and then after a year reduce your premiums, increase them later for a while, reduce them again and so on… at least in the kind of plan you have been recommended to sign up with as it comes front-loaded.

 

d_mat: the up-front costs paid over 5 years are mandatory,

Starshollow: As shown above in my examples, this is again total BS – plans are available with no front-loaded costs and they are even from the same provider with the same investment method.

 

d_mat: the rest is paid at 4% over the course of the plan and that in this sense zillmerung no longer exists,

Starshollow: It may not be a real “Zillmerung” in the mathematical and original sense because it is spread over 5 years now and not, like in the past, deducted in full during the first 1-2 years leaving you with “0” money in your investment after that initial period of time… but it is still heavily front-loaded and not in your best interest. Polish a turd, it still remains a turd (stole that from Jeff Dunham)

 

=> d_mat: :D as an aside, Jeff Dunham really is hilarious, uninterested in political correctness, and a great ventriloquist. But I digress...

 

d_mat: DWS motor system survived as one of best through the recent crash

Starshollow: Again the question would be here: as compared to what? If one makes such a statement, one must be able to provide examples from other providers who did worse. I could, but can the bank? Be that as it may (and this statement is actually mostly correct, but only mostly, if you only think about the average RIESTER plans from other providers but not compared to ones we have set up and managed their funds for our clients in recent past): you have the choice to use the great and well performing RIESTER plan from DWS – but as TOP RENTE with no initial costs and better performance over time for you as shown in my above example.

 

=> And that clears it up for me! After a month of reading and searching and discussing, I finally got the answers I had been looking for all along, clear and to the point, with some neat additional tips along the way. I hope this helps others in a similar situation; and if you are as impressed as I am with this information, this might be of interest: http://www.toytowngermany.com/forum/index.php?showtopic=31383

 

SMALLPRINT: At time of writing, apart from this direct communication with Starshollow, I have no affiliation to him, financially or otherwise. Just so you know...

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Thanks for posting that. Interesting in particular for me because I have the DWS Premium so at least the above confirms my opinion that I am definitely best to stay well away from the financial advisor who sold it to me. Funny thing is that he was recommended to me by friends who have worked with him for a few years now and are very happy with him and have recommended him to lots of other friends who are also happy with him. Still, at least I do plan to be here for a long time and only three years to go to hopefully get past the 'worst' of the Zillmerung (he did tell me at the time that the admin, fees etc. would be paid at the beginning so that's fair enough - what he didn't do however was tell me that there was an alternative to this). There was apparently a very good documentary on Riesterrente on Erste last week. Must remember to go and see if I can find that online at the weekend.

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Thank you Jeanie! I found two on ARD, one short, one long.

 

Short: http://www.ardmediathek.de/ard/servlet/content/3517136?documentId=8955484

Long: http://www.ardmediathek.de/ard/servlet/content/3517136?documentId=9216678

 

I can't say anything as to the content as I haven't seen it and actually the above post summarizes my knowledge up to know rather well ;)

These docs don't stay online forever though, so check them out now!

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