On March 12th, 2020 fairr-Riester sold all of its equity ETFs and equity funds. The investors’ money was parked in a clearing account and is currently in the so-called “cash lock”. Many Riester savers, who had relied on fairr Riester primarily because of the high share quota, are rightly more than shocked. The main argument of fairr – the high equity quota – has thus been completely reversed and investors are no longer invested at all. It would be smart to buy new shares in the stock market in the current market phase. The consumer portal finanztip, which has advertised fairriester very strongly, now recommends that you should no longer conclude a new contract there. You can find out exactly what happened in detail and what you should do now as the person affected in the following expert article or directly in the video.
Overview of expert articles on fairriester
What exactly happened at fairriester?
In order to understand what exactly actually happened at fairriester, it must first be explained how fairriester actually works and who are “involved” here. Many think that fairr itself is an insurer or a bank. But this is not the case. Fairr in itself only acts as an intermediary and mediates Sutorbank products. You can read about this in the imprint of fairr. So it is also the Sutorbank that manages the investors’ money. More on that in a moment.
In the retirement phase, i.e. the payment phase, mylife insurance comes into play. Because with a Riester pension you always need an insurer. ALWAYS! In the case of so-called Riester fund savings plans (e.g. also DWS or Union Investment), as these are also mediated by fairr, the money is not with an insurer right from the start – which would have been smarter. But more on that later.
In the course of the financial crisis in 2009, other Riester fund savings plans, such as DWS and Union Investment, shifted money from stocks to bonds close to stock market lows. Here, too, the reason was the premium guarantee: the providers were concerned that they would otherwise not be able to guarantee the guaranteed premium receipt.Source: https://www.wiwo.de/finanzen/vorsorge/riester-rente-fondssparplan-muss-wegen-corona-reissleine-züge/25672214.html
As with every Riester contract, the Riester fund savings plans brokered by fairr must also comply with the statutory contribution guarantee. This means that the Riester saver must have at least the contributions paid and the allowances received at the start of retirement. And this is exactly where the model of fairr or the Sutor Bank topples.
On March 12th, 2020, Sutor Bank sold all equity funds / equity ETFs and the investors’ money has been in a clearing account since then. The investors were only informed of this process in writing on March 20, 2020. If you have logged into your Riester account beforehand, you will have received the information there earlier.
Fairriester customers are more than outraged. Understandably. In many cases they probably had the hope that their Riester contract would buy cheap shares on the stock exchanges right now in the crisis.
Why did fairr sell the stocks / ETFs?
Now, of course, the urgent question arises, why fairr or the Sutor Bank sold the entire equity fund? At first glance, this not only makes little sense, but even completely irrational, since the shares were sold under extremely unfavorable conditions for many investors. Although fairr states on its own website that there would be no losses for investors, as there is a premium guarantee and that the prices have continued to fall after March 12th, 2020, in my opinion that is just clever window dressing. Of course, there were losses in the sense that you would probably have done better in the long run if you had stayed invested in the equity funds / equity ETFs.
But why exactly did the fund management of the Sutor Bank sell all shares in funds etc.? The reason lies primarily in the statutory premium guarantee (plus allowances received), which all Riester providers must meet. It does not matter whether it is a Riester pension insurance, a Riester bank savings plan or a Riester fund savings plan.
If a Riester provider – such as the Sutor Bank – has invested a large part of the Riester credit in shares, the provider must calculate very precisely and with foresight – with regard to the legally prescribed guarantees. He also has to ensure that any losses on the stock market can be made up by the time retirement begins. Here it is then calculated how one can compensate for the losses with secure interest rates.
And because exactly this was no longer possible, the Sutor Bank pulled the rip cord and sold all stocks / funds / ETFs. Otherwise the guarantee of contributions and allowances could no longer have been presented.
At this point I quote fairriester from their website:
As a result, the relationship between customer portfolios and the discounted obligations from the premium guarantee could no longer be reliably calculated as part of risk management. For this reason, the investment committee of Sutor Bank decided in favor of a stable risk assessment to reallocate into liquidity. All equity funds and equity ETFs were sold on March 12, 2020 and the equivalent has been held in liquidity ever since.Source: https://www.fairr.de/produkte/fairriester/umschichtung
In other words, one could also write that the Sutor Bank – which is quite small compared to the market – is not in a position to compensate for the fluctuations in the stock market in any other way in order to continue to provide the guarantees of savers. It would actually look different with a good insurer. More on this in the course.
Will fairr invest in stocks / ETFs again?
When and whether fairr will invest in stocks and ETFs again remains questionable. The following statement can be found on the fairr website:
A reinvestment is likely as soon as the fluctuations in the basis of calculation (especially interest rates) have subsided and allow sustainable risk modeling again. At what point in time this will be the case cannot yet be estimated in the current situation.Source: https://www.fairr.de/produkte/fairriester/umschichtung
This means that it cannot be ruled out that there will be investments in stocks and the like again, but it is completely unclear when this will be the case. One must also assume that fairr’s investors will not benefit from an upturn in the market, or if so, only partially, since investments should only be made again when “the fluctuations” have subsided. How exactly “fluctuations” are defined remains a mystery.
What should fairriester customers do now?
From my point of view and also from the point of view of finanztip, the approach of the Sutor Bank completely contradicts the actual basic idea behind the concept of fairriester: long investment horizon, passive investing and buy & hold. This approach has now been acted in exactly the opposite direction. Crisis or not, the equity funds should not have been sold. However, since the Sutor Bank was forced to do this, in my opinion this leads to only one valid conclusion:
The advertised concept of fairriester has failed and as an investor, especially in the long term, you cannot be sure that this will not happen again in the next crisis.
My and our recommendation is – especially in view of the very long investment horizon of most Riester savers – to reconsider the change of the Riester provider. Fortunately, this is possible with Riester contracts. This means that you can transfer all of your capital to a new Riester provider. Namely a provider who is financially stronger, can also invest in ETFs, but is not in the cash lock even now in the crisis, but continues to invest in the stock markets. And yes, these providers do exist. They cost a little more, correct. But Warren Buffett’s sentence never – “Price is what you pay for. Value is what you get. “ – was more relevant than in such a scenario.
Should you lock up fairriester now?
No. Short and sweet. The concept has failed and, as already mentioned above, finanztip advises against concluding a fairriester contract now. At this point it should be noted that finanztip advertised fairriester extremely heavily. However, we have already in November 2016 in our Insurance with head facebook group Fairriester not advised. Here is the corresponding post as PDF .
Are other Riester providers also affected?
Last but not least, you should ask yourself this question. Is only fairriester affected by the “cash lock” or has it affected all Riester providers who have also invested in equity funds / equity ETFs?
Riester insurers, for example, have also shifted their investments. This is also perfectly normal in a crisis. However – at least none of the Riester providers that we recommend – had to shift their customer funds completely to the clearing account.
Rather, one continues to invest in stocks / ETFs (upon specific request from us at individual insurers), for example through the so-called capital protection fund, which is still “interposed” with insurers.
In this way, for example, an upswing can be taken along, since the guarantee funds (capital preservation funds) are generally broadly diversified.
In some cases, new shares are currently being bought – at extremely low prices – which would actually have been the fairriester model.
Every customer of fairriester should now urgently consider whether one should not turn his capital into one reallocate financially strong insurers should, which is also in Equity funds / equity ETFs invested , one from the start guaranteed and high pension factor offers and only moderate cost having. Because if the example of fairriester has shown something here, it is that when it comes to long-term investments, one should not only look at the costs, but that other factors should be much more important for the investor.
or for a new contract: