Higher interest rates for retirement savers: upward trend in life insurance

Higher interest rates for retirement savers: upward trend in life insurance

According to a report by www.stern.de,

End of a years-long decline: interest rates for life insurance are likely to rise again across the board in 2024. However, consumer advocates would have wished for more.

Retirement savers can now expect higher interest rates on life insurance across the board. This trend is becoming clear and many providers are planning to increase interest rates accordingly. Some insurers, including Allianz Leben, have already increased their current interest rates for the coming year. This development will have a positive impact on all offers, as a board member of Allianz Leben emphasizes. Nevertheless, consumer advocates still see “room for improvement” and would like interest rates to be adjusted more quickly to current market conditions.

On average, insurance experts expect the current interest rate for classic private pension insurance to increase to around 2.45 percent next year, compared to 2.2 percent this year. For products with a reduced guarantee, the current interest rate could even rise to 2.5 percent. These developments show that the market is slowly recovering, although the rate adjustment will be a lengthy process.

The interest rate adjustment is related to the slump in interest rates in recent years, which has meant that life insurers have had to build up a capital buffer in order to secure their high promises to old contracts. Despite the positive development, companies will be forced to exercise caution as a large part of their long-term investments consist of relatively low-interest bonds with long maturities, the market value of which has fallen due to the increased interest rates.

The recommendation to increase the maximum interest rate from 0.25 percent to one percent from 2025 is also being discussed. However, this change would only apply to new life insurance contracts. In this way, the insurance industry hopes not to overextend itself with guarantee promises.

Overall, there is a positive trend for retirement savers, as interest rates on life insurance are expected to rise again, which could lead to better returns for customers in the long term.