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Why digital investments are suitable for wealth accumulation

The population in Germany is aging faster than in almost any other country in the world. In addition to the state pension, which is financed by compulsory contributions, there is a need for more flexible forms of private old-age provision.

It has been clear for years: the demographic development in Germany will lead to a further reduction in pension entitlements in the statutory pension insurance system: directly through lower pension payments, indirectly through an increase in the retirement age. Annual tax subsidies of more than 100 billion euros are already needed today to stabilize the pension level at around 48 percent of the last net earnings. This corresponds to almost a third of the entire federal budget.

The special focus is on the increasingly urgent problem of old-age provision. A report on the opportunities for digital investments by the Deutsche Finance Group and the Handelsblatt Research Institute sheds light on the current tension between demographic development and access to digital financial products and alternative forms of investment for wealth accumulation.

In general, Germany has a three-pillar model: The statutory old-age provision – consisting of the statutory pension, old-age security for farmers, civil servants’ pensions and various professional insurance policies – is considered a kind of basic security for life in retirement.

Retirement provision in Germany

The second pillar is forms of funded supplementary provision as part of company pension schemes, such as support and pension funds, pension funds or direct insurance. The third pillar are forms of private old-age provision: insurance, real estate, banking products, Riester contracts and other financial investments.
If one looks at the sources of income in the total volume of gross income of people aged 65 and over, the statutory pension insurance accounts for the largest share at 61 percent. Other old-age security benefits are in second place with 14 percent. Benefits from private and company pension schemes follow a long way behind with seven and eight percent, respectively, in third and fourth place. This is what the 2020 old-age security report of the Federal Ministry of Labor and Social Affairs shows. The second and third pillars of old-age provision therefore contribute, but to a much lesser extent than the statutory pension insurance.


The pay-as-you-go statutory pension is the most important pillar of old-age provision. Company pension schemes play a particularly important role in larger companies. It is often difficult for smaller companies to make a corresponding offer. The number of Riester contracts, on the other hand, has been declining for years. This is remarkable, since old-age provision is considered very important in surveys and is even associated with fears. Despite this, most people make few private provisions.

In view of the current development, the asset price inflation in Germany and the currently galloping consumer price inflation, the greatest challenge is therefore: How should it be possible to build up assets and make solid old-age provision – especially for younger people? How can you convince them of the need and of certain forms of investment?

Because even when it comes to investment forms, Germans are very conservative, regardless of social status and age – and prefer the classic savings account. The Bundesbank has calculated that of the approximately 7.7 trillion euros that Germans have saved as assets, 39.1 percent are invested in the form of cash and savings deposits. This is by far the largest item. Insurance companies came second with 27.9 percent. Investment funds, stocks and other investments play a rather subordinate role, while certificates and bonds play almost no role.

Wealth accumulation with stock market-dependent investments

On the other hand, alternative investment strategies tend to generate different performance patterns than stocks or bonds under the same market conditions. Alternative investments have rapidly gained in importance in recent years. If you look at real estate, for example, few other investments offer similar security and comparable asset and inflation protection. Historically, real estate has been an attractive capital investment that enables long-term and conservative wealth accumulation. Only a few other forms of investment have always offered a similar level of security and comparable asset and inflation protection.


Digital access to real asset investments

However, the real estate industry is also facing new challenges in view of the digital transformation. In particular, the ever-increasing strong competition from financial products with falling returns and negative interest rates influences the investment behavior of private investors, who are increasingly interested in new and innovative investment opportunities in the current key technologies.

With the law introducing electronic securities last year, the legal basis for issuing digital securities was created for the first time. In this way, space was created for new investment strategies for asset accumulation for previous investment products. The previous access to non-stock market investments in real assets is also changing fundamentally for new groups of investors. New future-oriented digital business areas in financial services are now possible.

The digitization of the investment sector is also finding broader acceptance among investors. According to a Bitkom survey, around 80 percent of the population will use online banking in 2021. In 2016, at 57 percent, it was significantly less. And in a recent survey by management consultancy PB3C, when asked whether they could imagine investing a one-off amount of EUR 50,000 or EUR 200,000 via a digital platform, 22 percent of those surveyed answered that they had already done so. Around 17 percent could imagine doing this.

Increasing acceptance, but also a high level of security and new high-yield investment products open up new opportunities for investors. And for old-age security, expanded and flexible options that more and more people can take advantage of.

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