German Investors Trust Funds Over Insurance for Retirement, Survey Shows

When planning for your retirement, where do you place your trust—and your money? A significant shift in German investor sentiment is underway. According to the latest Investor Barometer survey by Union Investment, investment funds are increasingly seen as the more powerful engine for wealth accumulation compared to traditional private insurance products. This trend reflects a broader search for yield in a low-interest-rate world and has major implications for how you approach your own retirement planning and asset allocation.

The Trust Gap: Funds Pull Ahead for Perceived Returns

The core finding is striking: 61% of German financial decision-makers in private households believe that with the same financial outlay, they would achieve a higher final capital with investment funds than with private insurance products. Only 28% held the opposite view. This represents a 20-percentage-point increase in favor of funds compared to a similar survey five years ago.

This growing confidence in funds is closely tied to the persistent low-interest-rate environment. With guaranteed returns from traditional savings and insurance contracts remaining minimal, savers are becoming more open to opportunity-oriented forms of investment. The survey found that 44% of participants currently consider buying stocks or equity funds attractive—a rise of nine percentage points from early 2017.

The Riester Riddle: Awareness Gap Hinders a State-Subsidized Option

Interestingly, this positive trend toward funds does not fully extend to the state-subsidized Riester pension. More than a third of respondents (34%) stated that this form of subsidized retirement provision is "not worth it." Analysts point to a critical information gap: many savers are simply unaware that Riester contracts can also be structured as fund-based solutions (Fondsgebundene Riester-Rente), combining state subsidies with market participation.

Wolfram Erling, Head of Future Provision at Union Investment, advises investors to familiarize themselves with the various Riester offerings. "The survey shows that the return opportunities of various Riester solutions are underestimated," he notes, encouraging people to choose an option that fits their current life situation and risk tolerance.

Widespread Doubt About the State Pension Fuels Private Action

The survey underscores deep-seated skepticism about the sufficiency of the statutory pension (gesetzliche Rente). Half of the respondents are convinced that the state pension alone will not be enough to maintain their current standard of living in retirement. A concerning 26%—more than one in four—express worry about not having enough money available in old age.

This doubt appears to be driving action: the survey reports an increase from 72% to 79% in the proportion of savers who have some form of private pension contract. However, this self-reported figure contrasts with industry data showing that new business for life insurance and Riester pensions has actually been declining.

Contrasting Data: The Persistent Dominance of Insurance Contracts

While sentiment and new money may be flowing toward funds, the existing landscape tells a different story. The survey's thesis of a fund takeover must be viewed in context:

• Scale of Insurance: Germans hold nearly 87 million life insurance contracts, a staggering number that far exceeds direct investment in funds and stocks.
• Shareholder Growth: The number of shareholders (including fund investors) has grown, from 4.41 million in 2015 to about 4.92 million in 2017. This is positive growth (+12% in two years) but starts from a much lower base than the insurance sector.

This indicates a market in transition: trust and future intentions are shifting toward funds, but the vast majority of existing household wealth remains tied up in traditional insurance structures, often due to long-term contracts signed in previous decades.

What This Means for Your Financial Planning Strategy

The survey highlights several key considerations for your own long-term investment strategy:

1. Don't Ignore the Yield Challenge: In a low-yield world, purely guarantee-oriented products may struggle to build sufficient capital. Incorporating growth-oriented assets like equity funds or ETFs into your portfolio is becoming a necessity for many.
2. Re-evaluate Riester with an Open Mind: If you have dismissed Riester, investigate whether a modern, fund-linked Riester contract could work for you. The combination of state subsidies, tax advantages, and market exposure can be powerful.
3. Adopt a Hybrid Approach: The choice isn't necessarily "funds OR insurance." A sensible strategy often combines elements of both:
   • Use insurance for essential risk coverage (e.g., disability, term life).
   • Use low-cost, diversified funds for the capital growth portion of your retirement savings.
   • Utilize subsidized products like Riester or company pension plans (betriebliche Altersvorsorge) for their tax and grant benefits.
4. Seek Transparent, Professional Advice: Navigating these options is complex. Consider consulting a fee-based financial advisor who can help you construct a balanced, cost-effective plan tailored to your goals, risk tolerance, and time horizon.

Conclusion: A Market in Evolution

The Union Investment survey captures a pivotal moment in German financial culture. Savers are logically responding to economic realities by looking beyond traditional guarantees toward potential growth. While insurance contracts still dominate the landscape in sheer volume, the trust and momentum are shifting toward investment funds as the preferred vehicle for wealth accumulation.

For you, the takeaway is clear: a proactive, informed, and diversified approach is key. By understanding the strengths and limitations of both funds and insurance, and by leveraging state-subsidized options wisely, you can build a more resilient and effective plan for your financial future.

Survey Background: The data was collected by Forsa on behalf of Union Investment from August 1-10, 2018, from 500 financial decision-makers in private households aged 20-59 who hold at least one financial investment.