A study from the veterans and pensioners charity VdK has painted a bleak picture with regard to the declining living standard of living faced by Germany's pensioners. A typical pensioner has typically 130 Euro less each month compared to the results of a similar survey undertaken only 4 years ago.

61 % of those asked had put money aside for there retirement but 36% had made no provision whatsoever for their retirement. In order to address this issue the German government introduced in 2001 a contributory pension scheme. The so-called Riester Rente (named after Walter Riester, former employment minister) has so far been taken up by 9 million Germans and the state contributes 114 Euro to each scheme annually.

Payments are made into eligible savings accounts (i.e. those certified by BAF Bundesanstalt für Finanzleistungsaufsicht) in order to reduce the tax burden on the pension fund.

Initially demand for the scheme was not strong but this has increased dramatically. One reason for the initial reluctance to join the scheme was the complex presentation of the terms and conditions. Also insurance brokers were less likely to push the proposal since it did not yield high commissions in comparison with alternative products. This is one reason why it is always advisable to seek independent advice or Beratung on this subject.

The relationship between premiums and payouts is not straightforward but as a rule of thumb it can be said that the scheme is very good for middle and low earners and for those with children. The proposed 100 Euro "golden hello" payment set to be introduced this year should make the Riester-Rente all the more attractive to prospective customers and set a counterpoint to the generally gloomy prognosis for Germany's pensioners.

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