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Investment opportunities What to do with the savings in inflation?

Status: 22.06.2021 12:28 p.m.

Even in times of rising prices and zero interest rates, many Germans have their money in savings books or call money accounts. But if you want to protect your savings from inflation, you need alternatives.

From Lothar Gries, tagesschau.de

Consumer prices in Germany rose by 2.5 percent in May – more than they have been for almost ten years. At the same time, there is practically no more interest on overnight and fixed-term deposits, the most popular form of investment among Germans. Cash is also in great demand. The value of the notes issued by the Bundesbank rose by 9.5 percent last year. A similarly high growth rate was last seen in 2014. At the end of May 2021, banknotes issued by the Bundesbank to the value of 839 billion euros were in circulation, 52 billion or 6.6 percent more than a year earlier. But if you want your money to grow, you have to consider other investments than hoarding cash or putting it on savings accounts. There is no shortage of alternative investment opportunities. The long lucrative federal bonds are no longer one of them. The yields on these securities have fallen below zero since August 2019. Investors who lend money to the German state have to pay for it – a turning point, as they still got a return of five percent at the beginning of the millennium. “Today federal bonds have no place in assets that are designed to maintain or increase in value,” explains Ulrich Kater, chief economist at Deka-Bank, which is part of the savings bank group.

No prospect of rising interest rates

Investors should also not give in to the hope that consumer prices, which have recently risen again, will lead to higher interest rates. Inflation is likely to accelerate further until the end of the year, but the European Central Bank (ECB) has repeatedly emphasized that it will adhere to the zero interest rate policy. The priority is to stimulate the economy again after the corona crisis, said ECB boss Christine Lagarde. In addition, the current rise in inflation is only temporary.

Investments that are considered to be risk-free, such as savings books and fixed-term deposit accounts, no longer offer any prospect of positive returns for the time being. In order for the saved to experience growth, stocks in particular offer themselves as a way out. Fund savings plans, for example, are a good way to get started. Investors pay regular amounts, in many cases from 25 euros upwards, into an investment fund in which various securities are bundled and which is managed by professionals. Alternatively, of course, investors also have the option of taking their money into their own hands and buying shares in individual companies on their own. In the past few years, you couldn’t go wrong when buying technology stocks.

Alternative ETF?

If you don’t dare to do this, but still want to invest in stocks, you can invest your money in a so-called Exchange Traded Fund (ETF). These funds replicate a stock market index (often with so-called derivatives). This can be the German share index (DAX) or other indices such as the US leading index Dow Jones. The performance of an ETF is closely linked to the respective index. As a result, the fees are usually lower than with other funds. Investing in the stock market is of course not without risk: If the index behind an ETF falls because the stocks in it fall, the fund also loses value.

Nevertheless, ETFs are enjoying growing popularity. According to industry experts, there are almost 7,000 of these funds. This is also due to the low interest rate phase. It ensures that more people invest their money in funds than before. Many have done well with this strategy and have achieved better returns than they would have achieved on a call money account. For example, an ETF on the DAX alone has generated a return of 55 percent in the last five years – provided that you kept your nerve at the beginning of the pandemic and did not sell when the markets collapsed by a third in spring 2020.

Gold and open real estate funds

A popular investment, especially in times of crisis, is gold. The corona pandemic has confirmed this again. By early August 2020, the price of a troy ounce (31.1 grams) had risen to an all-time high of $ 2,063, around a third more than at the beginning of the year. But then things went downhill again, to $ 1,684 in March. It is currently $ 1,775. In fact, gold is extremely volatile because the price is mainly driven by demand, because it has no “intrinsic value” like companies do. The precious metal is therefore not considered a reliable investment. There is also the often unsafe storage of bars or coins.

Those who shy away from the capital market and don’t believe in precious metals can also invest their money in real estate funds. They collect capital from investors and invest it in offices, shopping centers, residential buildings or logistics centers. The so-called open real estate funds are particularly popular with private investors. The income from such a fund, i.e. the rental income after deducting costs, is distributed to the owners as profit. With well-managed funds, an annual return of four to five percent can be achieved, a little more than the inflation rate.

Sometimes there is a risk of total loss

But the system has a catch. A minimum holding period of 24 months applies to open-ended real estate funds. An investor must also announce the return of his money to the fund company. Then he will get his system back after twelve months at the earliest. So if you have to get your money at short notice at any time, you should refrain from such investments.

The examples show that there is no shortage of alternatives to the savings book or a federal bond. But if you want to increase your money, you also have to be prepared to take risks. In some cases, for example when purchasing shares, there is even a risk of total loss, as the example of Wirecard recently showed. A look abroad – especially the USA, where far more people own shares than in Germany – shows that long-term wealth can only be built up with investments in the capital market

FAQ

Statutory old-age provision How the pension is financed

Status: 21.06.2021 10:35 a.m.

It is and should remain the foundation of the old-age provision of millions of Germans: the statutory pension. How does our pension system work and what are the challenges it faces?

From Andreas Braun, tagesschau.de

How is the statutory pension basically organized?

The statutory pension in Germany is organized according to the so-called pay-as-you-go system. Those who pay in do not build up a capital stock that they can fall back on in old age, but rather finance the current earnings of the current pensioners. Anyone who pays into the statutory pension thus acquires a right to such a pension in old age, for which the next generation then has to pay. After a certain waiting period – currently five years – this entitlement is given. In order to receive a pension, you must also have reached a certain age (currently 67 years as a rule).

Who pays into the statutory pension fund?

Employees in Germany are required to pay into the statutory pension. Employers take over half of the payments into the pension fund. The contribution rate is currently 18.6 percent, so 9.3 percent each comes from employees and employers. Self-employed, freelancers or people who are not gainfully employed can also make voluntary contributions. All contributors acquire pension entitlements to which a certain pension amount corresponds. It is determined by so-called “remuneration points”.

How much does the federal government pay into the pension fund from tax revenues?

Since the income from contributors has long been unable to cover the expenses of the pension fund, the federal government co-finances the fund through tax revenue. In 2020, these expenditures exceeded the 100 billion euro mark for the first time. The federal budget provides 106 billion euros for 2021. That is more than a quarter of the federal budget. According to experts the proportion could rise to more than 50 percent of the budget in the coming decades .

What caused the deficit in the pension fund?

The demographic development in Germany is the main reason: The number of people paying into the pension system is facing an increasing number of pensioners. In 2020 there were 57 pensioners for every 100 contributors. In 2050, it is estimated that 100 contributors will make payments for 77 retirees. Since the pension level has always been adjusted upwards in line with the general wage level and there have been no pension cuts, the deficit is growing steadily.

What is meant by the “sustainability factor”?

In order to be able to take into account the ratio of contributors to pension recipients when calculating the pension amount, the “sustainability factor” was introduced in 2005. It should lead to the fact that the pension increases are dampened with an unfavorable ratio of contributors to pensioners. However, only a quarter of the factor is included in the calculation.

What are the “stop lines” set by politicians?

The legislator has provided so-called stop lines, which secure the pension level and at the same time limit the contributions to the pension fund. It is planned that the pension level (with 45 years of contribution) will not fall below 48 percent of current average earnings by 2025. A second stop line relates to the level of contributions from employers and employees. The contribution rate may not exceed 18.6 percent until 2025.

Why is the situation in the pension funds worsening?

The increasingly unfavorable ratio of contributors to pensioners – together with the state guarantees for the amount of pensions and contributions – will further exacerbate the funding gap in the pension insurance scheme in the years to come. The federal government has not yet made any fundamental changes to this system.

What are the options for reforming the pension system?

Proposals for reform target both the revenue and the expenditure side of the statutory pension insurance system. In order to increase the income, either the contribution rates could be increased. In addition, statutory compulsory insurance is also being discussed for additional groups of people such as self-employed or civil servants. On the expenditure side, the pension amount can be reduced on the one hand, and the retirement age can be increased on the other. A link to general life expectancy, for example, is conceivable. The income from the contributions paid in, and thus also the future pension amount, could also be increased by investing more contributions in the capital market.

What should the insured expect in the coming years?

The growing imbalance between income and expenditure in the statutory pension insurance will make reforms necessary in the coming years – economists and politicians of the most important parties see this equally. Contribution rates are likely to rise while average pension levels are lowered and working lives are further extended. In any case, it is likely to become even more important for the insured to make private provision for old age

Bundesbank survey Germans are skeptical about the digital euro

Status: 16.06.2021 1:05 p.m.

The corona pandemic has further reduced the use of cash, also in Germany. According to the Bundesbank, Germans would be skeptical about the introduction of a digital euro. The European Central Bank (ECB) wants to decide this summer whether the introduction of a digital euro should be seriously tackled. This was announced last week by Burkhard Balz, board member of the Bundesbank. But the majority of Germans are skeptical about this project. Around 56 percent of all households surveyed were cautious in their initial assessment of the possible introduction of a digital euro, said Bundesbank board member Johannes Beermann yesterday in a speech at a cash conference of the German central bank. “Many of them are not convinced that this would offer sufficient additional value compared to the existing range of payment options.” Among other things, Beermann is responsible for the issue of cash on the board of the Bundesbank.

01/21/2021

Largely unknown project

In addition, according to the survey results, 77 percent of all respondents have never heard of or read about a digital euro. And those who know about it, fear in the first place that their personal data is not adequately protected. The security of the new means of payment also raises questions among the population, as does its availability within the entire euro area and the avoidance of additional costs. According to the central bankers, the digital euro could help on the way to the Smart Economy or Economy 4.0 by enabling programmable payments and supporting processing using modern technologies. However, the Bundesbank executive also emphasizes that the digital euro is not intended to be a substitute for cash. It is about a complementary offer. “As long as there is demand for cash, we will also offer cash,” said Balz.

04/16/2021

Cash as a safety cushion

ECB Director Fabio Panetta presented surprising figures on cash use during the Corona crisis at the Bundesbank conference. Accordingly, during the pandemic, people in the euro zone increasingly used cash as a safety cushion, although they made greater use of cashless forms of payment when shopping. According to Panetta, the demand for euro banknotes increased by 190 billion euros between March 2020 and May 2021. When comparing the volumes issued in spring 2020 with the average volumes of the past five years, this is an increase of four percent. At the same time, during the pandemic, significantly less purchases were made with notes and coins. “This seeming paradox – an increasing demand for banknotes despite a decline in cash payments – may be explained by the fact that people used cash as a means of dealing with uncertainty during the crisis,” said Panetta. Recent estimates suggest that even before the pandemic, only around 20 percent of the total amount of euro banknotes in circulation in the euro area had been actively used for payments. Panetta therefore assumes that euro notes and coins will survive the digital revolution.

Transparency International Germans concerned about economic influence

Status: 15.06.2021 09:26 a.m.

Many EU citizens perceive corruption as a major problem – this is evident from the current corruption barometer from Transparency International. Germany too has to do significantly more. From Philipp Eckstein, ARD capital studio Corruption: a problem across the European Union. The perception of the citizens is correspondingly critical. This is how the statements of the corruption barometer from Transparency International can be summarized. Between October and December 2020, more than 40,000 people were interviewed by telephone for the representative survey in the EU. Around a third of them said that they believe that corruption has increased in their country in the past year. The increase in Cyprus was particularly strong at 65 percent.

Corruption scandal in Cyprus

Last year, journalists there discovered that politicians had sold passports to criminals from abroad – probably for a fee. That is one reason why the perception of corruption in Cyprus has deteriorated so significantly, according to Transparency International. Almost two thirds of the EU citizens questioned said in the survey that corruption was a major problem in their government. There are clear differences within the EU.

Big differences between countries

While in Denmark and Finland only twelve and 16 percent perceive a corruption problem in their government, in Bulgaria it is 90 percent and in Croatia even 92 percent. Of the 4800 or so respondents in Germany, 34 percent said corruption was a problem in the federal government. Overall, according to the study, trust in government and politics in Germany is relatively high compared to many other European countries.

03/11/2021

Nevertheless: “We still have a problem with corruption,” says Hartmut Bäumer, Chairman of Transparency Germany. 62 percent of those questioned would say: “The government is essentially controlled in its decisions by large financial interests.” So it follows financially strong interest groups and not the interests of the general public. In addition, more than 38 percent have the perception that the federal government is doing too little against corruption. Taken together, “these are numbers that are really worrying,” said Bäumer, “because they feed those who are critical of the state and our liberal democracy anyway. And that is, so to speak, the breeding ground for everything that changes from lateral thinkers or right or left radicalism developed from. ”

Stricter requirements for lobby registers

The federal government urgently needs to do more to combat corruption and, above all, to ensure more transparency, according to Transparency International, for example through stricter rules for the lobby register. The anti-corruption organization is also calling for corporate criminal law to be introduced. Such measures can regain lost trust.

01/28/2021

This seems to be urgently needed, especially in the business sector. According to the survey, one in three respondents in Germany believe that all or most of the business leaders are involved in corruption. More than half believe companies use money or relationships to get public contracts.

Assets in Dubai Scholz can buy data on tax fraud

Status: 11.06.2021 5:57 p.m.

Finance Minister Scholz has initiated an explosive deal. An anonymous informant obtained data on thousands of Germans who own assets in Dubai. It is about uncovering tax fraud, said Scholz. Federal Finance Minister Olaf Scholz wants to intensify the fight against tax fraud. “At my instigation, the Federal Central Tax Office procured a CD containing tax-relevant data from the Emirate of Dubai,” he said in Berlin. These data would soon be evaluated by the federal states. It is about uncovering possible crimes such as tax fraud. “Tax evasion is not a trivial offense, but a criminal act.”

Exclusive 08/12/2020

Assets hidden from the tax authorities?

The “Spiegel” had first reported on the process. An anonymous informant offered the data. The purchase cost the Federal Central Tax Office around two million euros. According to the magazine, millions of taxpayers are said to be affected, including several thousand Germans who, among other things, have land and real estate in the Gulf emirate. The data provided insights into assets that were hidden from the tax authorities in Dubai, according to the ministry report. In addition to clearing up criminal offenses, the data also ensured that the tax authorities would have full access to cross-border transactions. This would avoid loss of income.

07/12/2019

Handover to the federal states next week

After the secret handover of the material, the data is now, according to the “Spiegel” report, at the Federal Central Tax Office in Bonn. Next week they should be sent to the tax authorities of the federal states so that they can examine aspects of criminal tax law and, if necessary, initiate investigations. So far, only federal states had bought tax data. The then North Rhine-Westphalian finance minister and today’s SPD leader Norbert Walter-Borjans bought several tax data CDs. He was NRW Minister of Finance from 2010 to 2017.

Private wealth at a record high Especially the super-rich get richer

Status: 10.06.2021 8:34 a.m.

Never before have people worldwide amassed so much private wealth as in the Corona year 2020. The wealth of Germans alone climbed – thanks to savings and real estate – to almost 20 trillion dollars. 20,000,000,000,000 dollars – this is the impressive sum of private wealth that private households in Germany had at their disposal in 2020. This emerges from the new “Global Wealth Report” by the Boston Consulting Group (BCG).

Better real estate than stocks

The Germans were helped by their much-cited propensity to save: financial assets, including cash, account balances, stocks, pensions and life insurance, grew by around six percent to around nine trillion dollars, according to the information. Investors in Germany saved above average, emphasized Anna Zakrzewski, BCG partner and author of the study. “Traditionally, Germans prefer to invest in real estate rather than in securities, as the real value quota of almost 60 percent clearly shows,” says the BCG expert. In the crisis year 2020, the real assets of Germans, i.e. real estate, jewelry, art and gold, increased by five percent to 13 trillion dollars. After deducting debts, private households in Germany had a total of just under $ 20 trillion.

Rising stock market prices, growing savings

The developments in Germany are a reflection of a global trend: people around the globe accumulated more wealth than ever in the year of the Corona crisis. Private financial assets rose year-on-year by a good eight percent to a record $ 250 trillion. Rising stock exchange prices and growing savings contributed to this. The BCG experts were surprised, as they expected a year ago that private assets would melt as a result of the corona pandemic. For the first time in 2020, the BCG experts will also consider property such as real estate or gold. Total assets minus debt was $ 431 trillion.

2900 super-rich in Germany

However, wealth is unevenly distributed. Above all, the club of the rich and super-rich grew strongly. The super rich – these are people with a net worth of more than $ 100 million. In the crisis year 2020, 6000 more people were accepted into the club of the super-rich, the number of members grew to 60,000. According to the BCG, these 60,000 people own 15 percent of the world’s investable wealth. In Germany alone there are 2,900 super-rich. This puts the Federal Republic of Germany in third place in the global ranking. The USA is at the top, followed by China.

Getting richer?

Against the background of the expected economic recovery after the Corona crisis, BCG expects steady growth in global private wealth for the coming years. By 2025, it should grow by an average of just under five percent annually to $ 544 trillion. Global inequalities are likely to increase further: According to the BCG forecast, people in North America, Asia excluding Japan and Western Europe in particular will get richer.

German armored locomotive

Before the battle, Hitler had never thought that the German army would be trapped in the Eastern Front and unable to extricate himself. According to his thoughts, the powerful German armored forces could end the Eastern Front in a short period of time. However, the reality did not develop according to his vision. The Germans on the Eastern Front were in a strategic stalemate with the Soviets. Germany had to mobilize a large amount of materials from the rear and transport them through a long railway line to meet the needs of the front-line troops. The Soviet guerrillas posed a huge threat to the German army on the long railway transportation line on the Eastern Route. They often smashed the railroad tracks and caused great troubles to the rear railway transportation of the German army. Sometimes the Soviet guerrillas even attacked the German army directly and seized military materials to supply themselves. The Germans urgently needed to find a countermeasure.

German armored train

Before the outbreak of World War II, the first German armored train in service was the escort train of the German railway department. The armored carriage was modified by adding 10mm bulletproof steel plate to the original freight carriage. It used a locomotive cockpit with a small amount of protective armor 57 type steam. Locomotive towing.

Early German armored train

The German army began to develop light and heavy armored reconnaissance locomotives used on railway lines in 1943. These armored locomotives can perform tasks alone and can also be connected in series to form an armored train fleet. They quickly maneuver along the rear railway line and once became the most popular Soviet guerrilla. Difficult goals.

Armored platoon at the end of World War II

German heavy armored trains usually consist of 12 different types of armored locomotives. The armored platoon is equipped with an armored command vehicle, two or three tactical armored carriages carrying machine guns, mortars, and infantry in series, and four are equipped with a No. 3 tank turret. Heavy reconnaissance armored locomotives, as well as other supporting anti-aircraft vehicles, flatbed trucks carrying motorized tanks, and so on.

Motorized Tank Lifting Platform Truck

The heavy reconnaissance armored locomotive weighs about 18 tons. The main weapon is a KwK L/24 short-tube 75mm artillery on the turret of a No. 3 or No. 4 tank. In addition to the turret coaxial machine gun, it also installs 4 MG34 machine guns. The car body is covered with 20mm thick steel armor, with inclined angles on all sides. Access hatches and observation windows are set on both sides of the car body. The crew members can also use light weapons to shoot outwards, and they can also leave the armored car for pursuit operations. This armor protection and firepower are already sufficient to withstand the attacks of the Soviet guerrillas.

German heavy armored locomotive

The engine of the armored locomotive is a 76-horsepower Steyr air-cooled gasoline engine, which can only reach 40 kilometers per hour on its own power. If it cruises at a slow speed of 20 kilometers per hour, its maximum range is about 700 kilometers.

Armored locomotive formation

The heavy armored reconnaissance locomotive also has a certain ability to fight alone. There are 7 crew members, including the commander, driver, loader and 4 gunners. In addition to daily patrols on transportation lines, it is generally organized to take the lead in front of freight vehicles to deter the Soviet guerrillas. It is more powerful in marshalling with other armored train tactical carriages, and can perform more combat tasks, and cooperate with the infantry to encircle and suppress Soviet guerrillas along the railway.

German armored train mobile defense

As a railway mobile armored vehicle, the heavy armored locomotive can rely on the railway for fast maneuvering. The railway itself limits its maneuvering route and range. However, it does greatly threaten the Soviet guerrillas and achieves this to the maximum. Weapons and equipment were designed for the purpose of the overall situation in the late World War II. If the overall situation was not good for the German army, the original production plan was not completed as scheduled. The actual quantity of this armored locomotive equipment is unknown, and it can still play a strong defensive role until Germany finally surrenders. .

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According to the Federal Statistical Office, the savings rate in Germany rose to a record level of 16.3 percent last year. This means that the Germans save more than 16 euros for every 100 euros of their disposable income. According to the statistics office, private households would not have spent their disposable income in 2020 to the usual extent. The government measures to contain the corona pandemic and the adapted behavior of the population to protect against infection with the corona virus would have led to this. As a result, consumer spending by private households fell by 5.4 percent last year compared to 2019. The savings rate increased by 5.4 percent compared to 2019.

Financial wealth reaches record level

Those who save have more money. According to data from the Bundesbank, the financial assets of private households reached the enormous sum of almost 7 trillion euros at the end of 2020. In the previous quarter, the assets were still 211 billion euros lower. The amount consists of cash, securities, bank deposits as well as claims against insurance companies and shares in investment funds. The Bundesbank’s data does not reveal how the enormous wealth is distributed among the citizens. However, the central bankers already know how the increase is made up. “In particular, behind the increase in financial assets were the increase in cash and deposits totaling 74 billion euros and the valuation gains on shares and other equity securities amounting to 61 billion euros,” said the Bundesbank. This means that at least the Germans who directly or indirectly own shares will also benefit from the current bull market on the stock market. Only today did the Dax hit another record high .

The number of shareholders is also increasing

In the meantime, the hunt for records on the international and national stock exchanges has also reached a broader public. According to the Bundesbank, savers, who are actually considered to be rather shy of the stock market, are increasingly investing in stocks or funds. “Private households remained very active on the capital market in the fourth quarter.” In the period from October to the end of December 2020, private households bought shares and investment fund shares totaling 21 billion euros. According to the Deutsches Aktieninstitut (DAI), the number of shareholders in Germany has climbed to the highest level in almost 20 years in 2020. Accordingly, 12.35 million people owned shares in companies or equity funds – almost 2.7 million more than a year earlier. The number was last higher in 2001 at almost 12.9 million.

Cash and deposits preferred

Nonetheless, stocks and funds still only make up a small part of the total financial assets of private households: at the end of last year, according to the Bundesbank figures, almost 805 billion euros were in stocks and other equity rights. In the case of investment funds, it was around 735 billion euros. Much of the wealth is still in cash and bank deposits, which hardly yield anything because of the slack interest rates . However, the argument of many savers is that they can be accessed quickly when needed. The volume of cash and bank deposits totaled around 2809 billion euros at the end of last year. Insurance and other pension products are still popular. At the end of December, their holdings totaled almost 2,458 billion euros.