The German Ministry of Finance has decided to raise the maximum interest rate (Höchstrechnungszins) applied by pensions skassens, pension funds and insurance companies to calculate the amount of pension reserves from the current 0.25% to 1% from 2025. . This is the first increase in Germany. For the past 30 years.
In response to the prolonged period of low interest rates, the Ministry of Finance had lowered the ceiling interest rate to 0.25%, the lowest level ever.
Its latest decision follows the recommendations of the German Association of Actuaries (DAV), which noted the trajectory of interest rate increases, current economic forecasts and inflation levels.
Against this background, DAV said in a statement that the increase in the maximum interest rate for new contracts forms the basis for “flexibility of the product range” and at the same time provides a stable basis for the development of interest rates in the medium term. .
“Inflationary pressures, in particular, have permanently changed the level of interest rates.At this point, we believe that long-term government bond yields will continue to exceed yields. [European Central Bank] Inflation target is 2.0%. Therefore, a technical interest rate of up to 1.0%, calculated taking into account a margin of safety, makes sense,” said Maximilian Hatcher, Chairman of DAV.
The German Insurance Association (GDV) also welcomed the Finance Ministry's decision.
“Raising the technical interest rate ceiling is an appropriate response to the sharp rise in interest rates from 2021 onwards,” GDV CEO Jorg Asmussen said.
He added: “This will have a positive impact on the design of life insurance products and consumers will benefit from it.”
This means pension schemes and insurance companies can offer higher guarantees to members, and guaranteed pension benefits may also increase, GDV added. Rising interest rates will also have a positive impact on occupational disability insurance premiums.
“Regardless of this, the minimum guaranteed amount for subsidized retirement benefits should be lowered so that more money can be put into investments that promise higher returns,” Asmussen said.
The ministry is also starting a consultation to reform the ordinance for calculating reserves (Deckungsrückstellungsverordnung).
