Pension savers in Germany are in for a boost as life insurance policies start offering higher interest rates once again. According to Lars Heermann from rating agency Assekurata, "The trend is pointing upwards. Many providers are taking this step." Industry giant Allianz Leben has led the charge by increasing the current interest rate for the following year. Board member Volker Priebe notes that "The interest rate is back. All offers are benefitting from this."
Consumer advocates, however, believe there's still room for improvement. Lars Gatschke from the Federal Association of Consumer Organizations remarks, "You now get more for call money than for profit participation." Gatschke believes that the capital buffer, or additional interest reserve, is a major factor hindering the faster implementation of higher interest rates.
Insurance expert Heermann predicts an increase in the current interest rate from the guaranteed interest rate and profit participation to an average of around 2.45% for classic private pension insurance policies – a significant jump from the 2.2% this year. Product with reduced guarantees could see their current interest rate rise to 2.5%.
Despite the promising trend, Heermann expects the increase in interest rates to be a gradual process. Many insurance companies have poured money into comparatively lower-interest bonds with good ratings and long maturities over the years. The recent rise in interest rates has lowered the value of these securities and created hidden liabilities on balance sheets. Selling the securities before maturity would result in losses for the companies, leading them to exercise caution.
The current interest rate consists of profit participation and the maximum actuarial interest rate set by the Federal Ministry of Finance – also known as the guaranteed interest rate. Interest rates only affect the savings portion after deducting acquisition and distribution costs, among others. The final surplus is added at the contract's end.
Germany's influential German Actuarial Association aims to increase the maximum actuarial interest rate of currently 0.25% to 1% for new life insurance policies by 2025. While old policies, some of which still yield 4%, will remain unaffected by this change.
Central bank policies, economic conditions, regulatory solvency, and investment portfolios all contribute to the current trend of higher interest rates in life insurance policies in Germany. While interest rates are anticipated to remain high, the overall trend suggests a gradual stabilization of the interest rate environment, providing relatively stable conditions for pension savers.
Enrichment data sparsely integrated into the article:
- Central bank policies have been increasingly raising interest rates to combat excess inflation.
- Economic growth in Germany has been stagnant, with several crises visibly impacting the country.
- Regulatory solvency positions for life insurers have reversed their downward pressure.
- German life insurers invest heavily in bonds, making changes in bond yields more impactful on their investment portfolios compared to stock market fluctuations.
