Reduction of pensions in private pension schemes: Courts doubt whether the practice is permitted, consumer advice center is suing insurance companies

Reduction of pensions in private pension schemes: Courts doubt whether the practice is permitted, consumer advice center is suing insurance companies

According to a report by www.fr.de, pension cuts for Riester contracts are being questioned by consumer advice centers. With private pension plans, it often happens that the pensions are reduced long after the contract has been concluded. Insurers are citing declining returns on the capital market. A court finds this doubtful.

The Cologne Regional Court has decided that clauses in contracts for private pension provision that allow insurers to subsequently adjust the pension factor and thus pay out a smaller pension later are ineffective. The consumer advice center has then filed lawsuits against four large insurance companies and is seeking a decision from the highest court.

The problem is that insurers can reduce pensions due to poor economic conditions, but do not improve the situation of pensioners when conditions improve. The consumer advice center hopes that further lawsuits will send a greater signal and has also filed lawsuits against Allianz, Axa, Zurich Deutscher Herold and LPV Lebensversicherung, among others. They also encourage other sufferers to resist this practice.

The Riester pension has long been criticized, among other things because of high fees and low interest rates, which reduce returns. The consumer advice center's lawsuit against a different clause in November 2023 has already been successful. The Federal Court of Justice struck down a clause that required customers to pay “closing and/or brokerage costs if necessary” before payment began because it was classified as unreasonably disadvantageous and non-transparent.

The effects of these lawsuits and judgments could lead to a change in the handling of contractual clauses in Riester contracts and offer consumers better security in old age. However, it remains to be seen how the courts in higher instances will decide and whether the criticized practices of insurance companies will change.