German Research Suggests Online Pensions Could Provide Better Returns

In a test by independent rating agency Morgen & Morgen, the online pension provider My Pension came out top in terms of financial performance, according to a German finance website.

The research compared a total of 22 pension insuranc schemes and myPension had the lowest total cost ratio of only 0.83% per year. With its fully digital offering, Frankfurt-based FinTech far outpaced the rates of major rivals such as Allianz, Volkswohl Bund and Standard Life. The average overall cost ratio in the test was 1.87% per year.

“Annual costs have a huge impact on future credit,” says myPension founder Rogier Minderhout, adding, “A 0.10% difference in costs leads to a higher credit balance of around 2,800 euros. Our costs, which are 1.0% lower than the industry average, will lead to a credit balance in old age that is € 28,000 higher than the competition. ”

The high costs of other providers are mainly due to the use of insurance or financial consultants to sell the product. At myPension, the consultation takes place directly online and by telephone. Rogier Minderhout said: “In times of FinTechs, the personal insurance consultant is as useful as a Netflix DVD.”

The test was conducted in November 2017 by the independent rating agency Morgen & Morgen. It assumes a monthly investment of 200 euros over 30 years. For each insurer, a gross return of 6% per year was assumed. The results of the test are available at http://www.mypension.de/testsieger.

Insurance Edge Comment;

Just like motor insurance, the pensions and life policy sector will be changed by Artificial Intelligence and automated systems in the future. While some may say the myPension test assumes too much in terms of gross returns and overall admin across a 30 year lifespan of the product, there’s no doubt that the role of the advisor is changing. 

People are migrating online and are keen to manage their own portfolio. Given the right information, within a regulatory framework, this can work. But in the UK, the workplace pension may well have a long term impact on the sector as many low-to-medium income employees simply opt to leave their retirement plans to government backed schemes. These may – or may not – provide a good standard of living when retirement day comes. Interesting times.