Really save without interest

Will ECB President Mario Draghi go down in history as the man who abolished interest rates? Consumer advocate Niels Nauhauser on the real causes of low interest rates, the challenges for savers – and the tricks of the banks.

EZB President Mario Draghi

WWill Mario Draghi, the President of the European Central Bank (ECB), who will chair his last interest rate meeting this week and be leaving at the end of the month, go down in history as the man who abolished interest rates? “That will have to be decided by the historians,” says Niels Nauhauser, finance expert at consumer advice centers. “However, many factors have contributed to the low interest rates for savers, in addition to the consequences of the financial crisis, above all the supply and demand for capital – consumers benefit from this, for example, with home financing, while they lose real money when they save safely.”

The real interest rates, which are crucial for saving, i.e. the interest rates after deducting inflation, were also partially negative at the time of the Bundesbank in the 70s or 80s, says the consumer advocate: “At that time, high inflation more than consumed savings accounts – even then Savings products like the savings book were unsuitable for long-term asset accumulation with a view to the real return. ”What has changed is that the negative interest rate is much more visible today because people are looking more at the nominal than the real interest rate.

Nauhauser says that there is no empirical evidence that the Germans are saving less because there is no interest for it, or more because they have to compensate for the loss of interest payments, says Nauhauser: “The saving rate of private households in Germany has not increased since the beginning of the low interest phase changed significantly. “

Better an ETF savings plan

How people save, on the other hand, depends largely on the behavior of intermediaries and providers of financial products. “For a long time, savers were mainly offered life insurance policies because they were tax-privileged and generated the highest commissions,” says the consumer advocate. Until the financial crisis, the banks had also sold certificates on a large scale, then the open real estate funds came until they too got into a crisis. “Recently, multi-asset funds were very popular in the sales of banks – all of these products were not offered because they represent needs-based good investments for consumers, but because they are attractive for banks because of the commissions that can be achieved.”

The banks and other financial companies were now happy to persuade savers that, because of the low interest rates, they should now spend more on retirement provisions in order to close the so-called pension gap. From a purely mathematical point of view, this seems convincing: If you get a lower real interest rate, you have to put more aside to get the same result. “Our appeal to consumers, on the other hand, is: Instead of saving more, reduce the costs of old-age provision and spread the risks widely!” Says Nauhauser.

Instead of a Riester contract, a Rürup pension or the next best fund savings plan from Volksbank, a very mundane ETF savings plan on the global MSCI World share index is often the much cheaper option. More important than the one-off costs when signing the contract are of course the annual costs – by reducing the annual costs, the pension can be doubled at the end of a period of 20 years.