Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Private Insurance and Old Age
Provision in Germany
Peter Schwark, GDV
Head of Department Social Policy and Pension funds
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Outline
1.
The Life Insurance Market in Germany
2.
The German Statutory Pension System
3.
Reform projects in the pension field
4.
Conclusion
2
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
German Insurance Markets 2002
Premium in EURO million / Growth rate 2002
4%
Life 65.1 EURO bn.
+ 4,5 %
Accident 5.6 EURO bn.
+ 1,5 %
34%
46%
Property 47.2 EURO bn
+ 3,1 %
16%
premium total: 141.0 EURO bn.
Health 23.1 EURO bn
+ 6,4 %
3
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Top Ten of Life-Insurers 2002
Premiums in EURO bn.
9,6
Allianz
6,9
Öffentliche Versicherer
Aachener und Münchener
3,0
2,8
Hamburg-Mannheimer
R+V
2,8
Deutscher Herold
2,7
Victoria
2,4
Volksfürsorge
2,2
AXA
2,0
Debeka
1,9
Gerling
1,9
4
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Life: Gross premiums written in EUR million
70.000
67.300
65.058
65.000
61.225
62.387
58.749
60.000
55.000
52.505
50.500
50.000
45.000
40.000
1997
1998
1999
2000 *)
2001
2002
2003 **)
+ 3.5 %
**) estimated business trend
5
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Life: Benefits in EUR million
64.400
60.000
56.290
55.000
52.340
49.405
50.000
44.442
45.000
40.226
40.000
36.960
35.000
30.000
25.000
20.000
*) estimated business trend
1997
1998
1999
2000
2001
2002
6
2003*
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
New business by type of insurance
Endowment insurance, annuity insurance and unit-linked life insurance,
number of contracts in %
100%
80%
12,5
60%
11,7
12,9
14,5
16,8
16,8
20,3
40%
68,4
67,3
58,4
54,2
50,2
48,0
20%
46,6
42,6
39,4
14,3
17,6
18,2
16,4
20,7
26,8
2000
13,7
36,4
26,8
22,6
18,9
23,5
2001
2002
1. Hj.
2003
39,1
0%
1990
1991
1992
1993
1994
1995
1996
total of endowment insurance
total of unit-linked life insurance
1997
1998
1999
total of annuity insurance
other life insurance
7
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Life insurance by international comparison
Share of total life premium 2001
FL
SE2%
2%
CH
4%
Source: CEA
Other EU Others
6%
2%
BE
3%
GB
34%
ES
4%
NL
5%
IT
9%
DE
12%
FR
17%
8
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Life insurance by international comparison
9
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Benchmarking pensions *)
90
first pillar
second pillar
third pillar
80
70
60
50
40
30
20
10
0
DE
NL
CH
*) Income structure of 2-Persons-Pensioners-Households
Source: Miegel/Börsch-Supan (1999)
GB
US
10
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Outline
1.
The Life Insurance Market in Germany
2.
The German Statutory Pension System
3.
Reform projects in the pension field
4.
Conclusion
11
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
German pension system: 3 pillars
statutory pension
insurance (PAYG)
occupational pensions
life insurance
12
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Pension provision in Germany: Details
Shares of benefits in 1999
Supplementary
pensions for public
sector employees
Civil service
pensions
10%
Life
insurance
Occupational
pension schemes
2%
17%
5%
66%
State pension system
Source: GDV, Alterssicherungsbericht 2001
13
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Development of the statutory pension system
•
1889: Founded by Chancellor Bismarck as disability insurance
•
1911/1916: Introduction of old age pension system (retirement with 65)
•
1957: Increase of old age pensions aiming at maintaining the reached
standard of living (indexation of pensions with general wage trend)
•
1972: Further improvement of benefits
•
1989/1996: First reforms to make PAYG system fit for the demographic
challenge
•
1997: Introduction of a „demographic factor“ reducing pension dynamics
•
1998: Newly elected Government cancelled 1997 reform
•
1999: Channelling of newly introduced Eco-taxes into the PAYG-system
14
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Development of contribution rates to
public pensions
21
20,3
19,9
20
18,7
19
18,0
18,7 18,5
19,3 19,1
19,5
19,1
18,0
18
17,0
17
16
15
14,0 14,0
contribution rate in % of wages
14
13
1957 1960 1970 1975 1980 1985 1990 1995 1997 2000 2001 2002 2003 2004*
*: estimation
Source: VDR
15
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Social security contribution ceiling (1960 – 2004)
Old and new Länder, € per month
6.000
5.150
5.000
4.350
4.000
3.000
2.000
1.000
West
Source: VDR
East
04
20
00
20
96
19
92
19
88
19
84
19
80
19
76
19
72
19
68
19
64
19
19
60
0
16
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Part of public pensions financed by the Federal
Government
until 1990 West-Germany, since 1991 Germany
30,00%
25,00%
20,00%
15,00%
10,00%
5,00%
0,00%
1973 1976 1979 1982 1985 1988 1991 1994 1997 2000
Source: VDR
17
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Demographic perspectives for Germany
2050
2025
1997
110
110
110
100
100
100
90
90
90
80
80
80
70
70
70
60
60
60
50
50
50
40
40
40
30
30
30
20
20
20
10
10
10
0
1.000.000 500.000
0
1.000.000 500.000
0
1.000.000 500.000
0
500.000 1.000.000
men (new Länder)
Source: Birg/Flöthmann, 2000
men (old Länder)
0
500.000 1.000.000
women (new Länder)
0
500.000 1.000.000
women (old Länder)
18
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Population in Germany: age-groups
2000: 82 Mio.
thereof:
0 to 20: 17 Mio.
20 to 60: 46 Mio.
60 and older: 19 Mio.
90.000.000
80.000.000
70.000.000
60 and older
2030: 77 Mio.
60.000.000
thereof:
0 to 20: 12 Mio.
20 to 60: 36 Mio.
60 and older: 29 Mio.
50.000.000
40.000.000
30.000.000
20 to 60
2050: 68 Mio.
20.000.000
10.000.000
thereof:
0 to 20: 10 Mio.
20 to 60: 30 Mio.
60 to: 28 Mio.
0 to 20
0
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Source: Birg/Flöthmann, 2000
19
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Development of old age dependency ratio
140
120
100
80
60
40
20
0
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Immigrated Population
Population in Germany
Source: Birg/Flöthmann, 2000
German Population
20
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Outline
1.
The Life Insurance Market in Germany
2.
The German Statutory Pension System
3.
Reform projects in the pension field
4.
Conclusion
21
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Pension-Reform I:
Reducing Public Pensions
SGB
Cuts in PAYG state pension system
• Diminishing the level of pensions from today 70,7 %
to 64 % in 2030 of average net-income
(standardized for an average earner after 45
contribution years).
Long term objective
• Limit the contribution rate to 20 % of wages until
2020, and to 22% until 2030.
22
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Pension-Reform II:
increasing private (funded pensions)
Retirement Savings Law (AVmG)
• introduction of “Riester scheme” for supplementary
(funded) pension provision
(2nd or 3rd pillar) => voluntary scheme
• strengthen occupational pensions
• introduction of pension funds in Germany
23
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
“Riester conditions” for individual
pension plans
• Withdrawals starting at age 60 (at the earliest)
• Minimum guarantee on benefits (capital maintenance)
• Lifelong annuity or
withdrawal plan coupled with annuity from the age of
85
24
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
“Riester” market
New business in Riester products
Number of contracts for each quarter
1.600.000
1.400.000
1.200.000
1.517.740
1.000.000
800.000
600.000
488.594
400.278
400.000
231.821
163.157
101.847
200.000
0
I.Q.2002
II.Q.2002
III.Q.2002
IV.Q.2002
I.Q.2003
II.Q.2003
25
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
“Riester” market
Reasons for unsatisfactory spread:
• inadequate consciousness of the need to make
individual provisions
• economic situation: high unemployment,
declining income
• complex subsidization
26
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Occupational pension schemes in
Germany, Assets 2001
Support fund
(Unterstützungskasse)
(€ 22,8 bn)
Total € 620.4 bn
7%
59%
Book reserves
(Direktzusage)
(€ 202,3 bn)
Source: aba Arbeitsgemeinschaft für betriebliche Altersversorgung e. V.
21 %
Retirement fund
(Pensionskasse)
(€ 72,7 bn)
13 %
Direct insurance
(Direktversicherung)
(€ 43,8 bn)
27
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Taxation of occupational pensions
• EET taxation
• up to 2418 EURO p.a.
• retirement fund, pension fund
• Flat-rate taxation (20 %)
• up to 1.752 EUR
• direct insurance, retirement fund
• Riester incentives (subsidies and EET taxation)
• increasing from from 525 to 2100 p.a. (2001-2008)
• direct insurance, retirement fund, pension fund
28
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Outline
1.
The Life Insurance Market in Germany
2.
The German Statutory Pension System
3.
Reform projects in the pension field
4.
Conclusion
29
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
New reforms ahead
•
Further reforms in the statutory system:
decreasing pensions levels, increasing the pensionable age
•
Introduction of a full taxation system for old age pensions
•
Reform of tax-incentives for private and occupational system:
less bureaucracy or more regulation ?
30
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Report „Rürup II“
Mission of the Rürup II
Committee:
The Rürup II Committee should
submit proposals by the
autumn of 2003 with a view to
stabilizing the financing of
pension, health and long-term
care insurance on a long-term
and sustainable basis.
31
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Implications of Rürup II for PAYG Pensions
Starting situation of the Rürup II Committee:
Without a new reform of statutory pension insurance the following
developments are likely:
• Contribution rate will rise from 19.5% to 24.2% by 2030.
• Gross pension level will decline from 48.2% to 41.9%.
• Slow development of old-age provision operated on a funded basis.
Conclusion:
Despite the so-called “great reform” in 2001 state
old-age provision operated on a pay-as-you-go basis
is not ensured on a “sustainable” basis.
32
Gesamtverband der Deutschen Versicherungswirtschaft e.V.
Proposals of Rürup II
Dismissed proposals:
extension of contribution ceiling and of the category
of persons liable to insurance
Positive proposals on statutory pension insurance:
• raise retirement age from 65 to 67 beginning in 2011
• modification of pension adjustment formula
Positive proposals on private pension insurance
• Simplification of the Riester-Incentives
33

The German Statutory Pension System