Pensions: More share ownership, and less poverty in old age?

5 December 2018

Friedrich Merz wants to use the stock market in order to strengthen pension provision in Germany. His proposal: The policy aims to make citizens buy shares, for tax purposes, better – for example the annual exemption amount, up to the you can build a share – based savings or pension plan. The share of this savings plan is only likely to be sold in the age, the income would have to be post-controls.

With the advance of the candidate for the CDU presidency, has triggered a wide debate also because Merz, Chairman of the Supervisory Board at asset Manager BlackRock Germany. How useful is the idea? The key Figures for the classification:

First a look at the basic assets in Germany It is, according to Figures from the European Central Bank (ECB) surprisingly bad: A household has, according to the data, the Median net assets of around 60,000 euros – half of the households have more and half less. Among the 60,000 Euro saving deposits, stocks, real estate, life insurance, and vehicles and Household goods; deducted debt. In comparison with other countries in Europe that is little: The EU-wide Median, according to the ECB, at around 100,000 euros. A Median household in Spain or Italy even has assets far more than the Double of the net.

The money sits in many home-locker to keep not just. Even more serious is that 40 percent of Germans have virtually no Savings. These people find it generally difficult to invest money in share or private for your old age.

Is the proposal of Friedrich Merz so nonsensical? Equities and equity funds offer a quite reliable return opportunities – at least in retrospect, and over long periods of time.

a went Who landed in the past on a monthly basis a fixed amount in equities on the German stock index (Dax) and its savings plan dissolved after five years, so that a high level of risk: In the worst case, he would have to cope with according to calculations by the German share Institute, a loss of around 23 percent per year. However, in the best case, he would have gained an annual return of 39 percent. On average, investors achieved over five years, a return of one percent in the year.

the long-term asset accumulation, approaching the Minimum and maximum yield, but increasingly: Who has invested 20 years in shares and funds, can be recorded at the end of at least a return of 4.7 per cent, in the best case, with a good 16 per cent. Here the average is nine percent.

broad diversification can reduce the risk of losses so substantial. The same is true for regular investments over a long period. Such savings plans or Fund investments the same in the short and medium-term price fluctuations.

it is Important to ensure, however, that the savers binds all of its free cash, entirely in shares: Who could be forced during a stock market lows, suddenly, to dispose of his share or shares of the Fund, would lose much – and had focused its investment strategy better different.

Here is a weak point of the proposal of Friedrich Merz: even with small monthly contributions, share can be an effective pillar of the private pension schemes or to the asset structure, but they should never be the only one. Anyone who pursues a long-term savings plan, you must be sure that he can comply with it. The is however also the case for pensions or life insurance, and similar forms of investment.

Despite the chances of a return, the Germans are in a global comparison, stock muffle. In the year 2017, around ten million German stocks or shares in a Fund held according to the statistics of the German share Institute, which are 15.7 percent of the population, so approximately one in every six citizens. And that’s the highest level for ten years. For comparison: In the USA, around a quarter of the population owns shares or shares of the Fund, in the Netherlands, there are even 30 per cent (as of 2016).

Add to this: About 60 percent of the shareholders in Germany are 50 years or older, the Younger ones hold back. Since the plant rooms, but only over a longer period of time with low risk to implement, the following applies: The sooner, the better. It is important, however, to plant questions well advise. Who knows what he’s doing should stay away from the stock market. It is also a tax-promotion doesn’t change anything.

shares-in other words, a relatively reliable rate of return, and the shareholder ratio in Germany is low. It can, therefore, be quite reasonable, and more people to the stock market. Also, because many traditional forms of investment do not bring comparable gains, or with a view on Inflation and even asset destruction.

but It must not be equal to each shareholder. A state pension Fund would be another way to let the citizens of the profits of the company benefit or to stabilize the pension system.

And for a large Problem of the statutory pension Merz’ proposal is not a solution: Last updated about 4.2 million workers were employed in full-time in the low-wage sector. That means in the East a merit of 1733, and to the West of 2.226 Euro gross. Thus, it is threatened in the age of poverty – and today provide no way private. The Niedriglöhnern could help a measure, the Merz don’t like: the increase of the statutory minimum wage.