Insurance companies are not allowed to subsequently reduce the pension factor in pension insurance contracts based on falling capital market interest rates. This was decided by the Cologne Regional Court. Consumer advice centers have taken legal action against insurers.
The most important thing in brief:
- First, the Cologne Regional Court overturned a clause in a pension insurance contract that allows the pension factor to be reduced. An employee with a Riester fund policy sued against the reduction and was right.
- Consumer advice centers have taken legal action against Allianz, Zurich, Axa and LPV Lebensversicherung, where the insurers had also reduced Riester pensions based on a clause.
- The consumer advice centers provide a sample letter. However, clarification from the Federal Court of Justice is still pending.
Judgments and ongoing legal proceedings
Whether the insurers were legally allowed to reduce pensions based on the clauses used has not yet been finally clarified by the highest court. The consumer advice centers are currently taking legal action against various insurers and are seeking clarification from the Federal Court of Justice.
For the first time, the Cologne Regional Court has declared an insurer's pension reduction to be invalid. In a case against the Zurich Deutscher Herold regarding unit-linked pension insurance, the judges decided that the subsequent reduction of the so-called pension factor in an ongoing contractual relationship is not permitted (case number: 26 O 12/22).
An employee had filed a lawsuit against the pension reduction. The insurer appealed the ruling, but then withdrew it. The judgment has therefore become legally binding. However, a ruling by a regional court does not send as strong a signal as a ruling by a higher regional court. By withdrawing the appeal, the insurer may have prevented exactly that.
The insurer Zurich German Herald used a clause in a contract according to which, among other things, he can reduce the pension factor if the return is lower. Specifically, it was about the following clause:
“If life expectancy increases unexpectedly or the return on investments drops more than just temporarily and the long-term viability of a lifelong pension payment is no longer guaranteed, we are entitled to reduce your monthly pension to the extent necessary for each EUR 10,000 of contract credit, in order to ensure this long-term fulfillment. When calculating your monthly pension, the amount per EUR 10,000 must not be less than the amount that results when the mortality table and the actuarial interest rate are applied, which are at the end of the deferral period in accordance with the then valid regulatory provisions and requirements as a basis for calculation. In addition, 50% of the monthly pension stated in your insurance certificate must not be less than 10,000 euros.
We are only entitled to this right until the agreed start of pension payments. We may only exercise it with the consent of an independent fiduciary who has examined and confirmed the requirements and appropriateness of the adjustment. We will inform you in good time about any adjustments.”
However, if the calculation basis changes again in favor of consumers, the clause does not provide for an increase in the pension factor. The Cologne Regional Court deemed this clause to be ineffective.
The North Rhine-Westphalia Consumer Center and Finanzwende are working together to combat the unlawful pension cuts for Zurich customers. The North Rhine-Westphalia Consumer Center has warned Zurich Insurance and will file a representative action if the company does not give in.
In a similar procedure, the Baden-Württemberg consumer advice center is having a clause from Allianz Lebensversicherung judicially reviewed. Here the clause reads as follows:
“If, due to circumstances that were not foreseeable when the contract was concluded, the life expectancy of the insured person increases so much or the return on investments (see Section 25 Paragraph 1a Sentence 4) falls so much, not just temporarily, that the return in Sentence 1 “If the calculation bases mentioned above are no longer sufficient to secure our pension payments in the long term, we are entitled to reduce the monthly pension for every €10,000 of policy value to such an extent that we can guarantee pension payment until your death.”
Allianz had reduced Riester pensions, citing the controversial clause. The Stuttgart Regional Court dismissed the consumer advice center's lawsuit, and the case is now being heard by the Stuttgart Higher Regional Court (Az 53 O 214/22). The hearing is on January 16, 2025.
Those too Axa life insurance and LPV life insurance (formerly Postbank Lebensversicherung) have capped customer claims based on similar clauses and were warned by the NRW consumer advice center.
Why is the pension factor important?
The pension factor determines how much pension you will later receive as a pension for every 10,000 euros of capital. The case against Zurich concerned a unit-linked Riester pension insurance contract. The pension factor that was agreed upon when the contract was signed was 37.34 euros. During the savings phase it was finally reduced to 27.97 euros. This would have meant a pension cut of around a quarter from the start of pension payments.
In the case against Allianz in 2006, a consumer was sold a pension insurance policy known as “RiesterRente InvestGarantie”, with the promise of a monthly pension payment of 38.74 euros per 10,000 euros of policy value. The insurer has now reduced the pension factor to 30.84 euros per 10,000 euros of policy value. This corresponds to a reduction of around 20 percent.
The question of whether such clauses are effective also has far-reaching consequences for consumers who have concluded contracts with similar clauses with these and other insurers. It is not yet possible to predict how many consumers could be affected.
What do I have to do as a consumer now?
Immediate action is necessary for policyholders with similar clauses in whose contracts the pension factor has been reduced in the past not required. But you can also Defend now against a corresponding pension reduction if the insurer has made this on the basis of such a clause. You can use this sample letter to do this. You can also use it for contracts that already have in the retirement phase are.
Riester has failed – the consumer advice centers are calling for an alternative
The complaints about the Riester pension have not stopped in consumer advice centers for years. A large part of the savings contributions and allowances disappear due to the high commissions, closing and administration costs. Consumer advice centers have repeatedly uncovered illegal practices. But these are just the tip of the iceberg. The behavior of Riester savings contract providers directly affects savers’ pensions.
If politicians want to stick to pensions via the capital market, then they must focus on consumer interests. That is why the consumer advice centers are politically committed to a standardized basic product in private pension provision.
