Why Riester and Rürup contracts almost never achieve the promised returns and what cost traps threaten according to financial experts.

Why Riester and Rürup contracts almost never achieve the promised returns and what cost traps threaten according to financial experts.

According to a report by www.merkur.de,

According to experts, Riester and Rürup contracts almost never produce the promised returns. In addition, customers usually face much higher costs than initially stated. Private pension provision is important, but state-sponsored Riester pensions have become a slow seller. In a study, the citizens' movement Finanzwende calculated probable returns from 111 Riester and Rürup offers available last year. Not a single Riester offer covers inflation compensation and most Rürup offers cannot achieve this either. The average term yield is only 0.8 percent for Riester pensions and 1.0 percent for Rürup contracts. Real customer benefits and high costs prevent better returns, and most insurers calculate with unrealistically high life expectancies in order to achieve the desired target return.

According to many experts, the reform of the Riester pension is no longer worthwhile because both the returns and the information on costs are disappointing. The financial sector could therefore suffer a significant loss of confidence among investors and alternatives to private pension provision could become increasingly popular in the future. This could impact the market for life insurance and other retirement products. It remains to be seen how politicians and the financial industry will react to these revelations and whether they will take measures to regain consumer trust.