An investment from birth

Former financial advisor Albrecht Friedel has one topic in his retirement: How can poverty be avoided in old age? Here he presents ideas for a fourth pillar of old-age provision.

Albrecht Friedel calculates that investing money from birth would lead to much better payouts.

EActually, Albrecht Friedel could lean back and relax. For four decades he worked for financial service providers, initially for building societies such as Schwäbisch Hall and BHW, then as an independent financial advisor and retirement planner. Today he is 70 years old and a pensioner. But something still worries him: a system that allows old-age poverty to develop. “Germany is well positioned economically and in terms of the social system,” says Friedel. “But people have to do three jobs. Single parents cannot cope. “

His criticism of old-age provision sounds similar to that of the FDP and the Greens in the federal election campaign, and he also shares their sympathy for shares in the funded fund, but his proposed solution differs. “The distinction between the employment phase and the retirement phase is common, but what happens from birth to the beginning of your career?” He asks and answers himself: “Nothing! This time is wasted. “

Friedel makes an unusual suggestion. In addition to the three pillars legal, operational and private, a fourth should be added: a component that is financed independently of contributions and income, is intended to prevent old-age poverty and is to be financed from the compound interest of an investment that begins at birth. 1000 euros in welcome money for each newborn child and then 10 euros from child benefit, 120 euros per year, would be sufficient for this according to his calculation.

Friedel has created a sample portfolio for illustration

“My idea has been alive for a few years,” says Friedel, who lives in the Hessian city of Gelnhausen. To illustrate this, he created a sample portfolio some time ago. It is fed from the 1000 euros to each newborn and the monthly 10 euros from child benefit until the child benefit ceases, a maximum of 4000 euros per citizen.

As soon as the state no longer pays, citizens should raise their 10 euros themselves – until they are 60, at most 8,200 euros. “That is feasible for everyone involved,” he says. Also for the state: for the Riester subsidy, which he would continue to hold for the third pillar, it spends more than 2 billion euros a year. This is different from the Swedish model, for which the FDP and the Greens have sympathy. “But that’s a mixture with the legal model. I’m against it, ”says Friedel.

In the current legislative period, the federal government aimed to introduce a simple standard product in the third pillar as a successor to the Riester model (see article on the right). Critics complained about the subsidized third pillar introduced in 2001, and financial sales companies in particular benefited from it. “You don’t need a sales machine in my model,” says Friedel. “With little effort one would have a great benefit.”

For Friedel, the underestimated compound interest effect is decisive

In his opinion, however, the decisive factor is not the costs. “The advantage of starting early is the compound interest effect, which people underestimate,” he says. With a 60 year investment horizon, bonds and cash are dispensable. Equities should be internationally diversified. “We don’t have a lot of technology in Germany, but that’s where most of the income was generated,” he says.

With the Riester pension, investors would not have benefited from the necessary guarantee. You have forced product providers to invest in bonds with bad yield. “If you don’t have the worst companies, you will be in excellent shape over the long term,” he says, referring to his live portfolios, which have been running for four and a half years and have an annual return of 13 percent. “I went down with the Corona crash. But if I had had security systems, I would not have taken the upswing with me, ”he says. Everyone born in Germany should be entitled to the fourth pillar.