Return potential on equities should be used in German pension system, Deutsches Aktieninstitut argues

The return potential of long-term equity investments should be used in the German pension system, according to Deutsches Aktieninstitut.

Its comments follow the publication of its latest Return Triangles, based on historical returns, which it believes can serve as a guide for political decisions.

Commenting, Deutsches Aktieninstitut chief executive and board member, Henriette Peucker “The opportunities for high returns on long-term equity investments should finally be used in the pension system as well. The right incentives for more equities in both statutory and private pension provision must be set.”

“I would like to see the Return Triangles given a prominent place on the desks of political decision-makers.”

However, the association argued that any further additional tax or social security burden on capital gains sets completely the wrong incentives and harms those who improve their financial security and provide for their old age by investing in shares.

Its Return Triangles found that regular, long-term investment in a diversified portfolio of shares is the ideal instrument for retirement provision and wealth formation.

It said that those who invest in equity funds, exchange-traded funds (ETFs) and equities on a long-term, diversified and continuous basis can generate returns of 6-9 per cent per year.

Peucker, said: “2024 was a good year for shareholders. The German stock index DAX rose by almost 19 per cent. However, the long-term investment horizon is more important than looking at the development of a single year.

“Our Return Triangles show that patience pays off in the stock market. Investors who stay on course can generate solid returns of 6-9 per cent per year on average. This makes equity investments an ideal component for retirement provision and building up financial reserves.”

For example, someone who has invested €50 a month in the DAX over the past 20 years in an equity fund or ETF savings plan has achieved an average return of 7.8 per cent per year. A total of €12,000 paid in over 20 years grew to around €28,000 – more than doubling the original amount paid in.

Deutsches Aktieninstitut traditionally updates its Return Triangles at the beginning of the year and they illustrate historical stock market returns. There are different versions of the Return Triangles.

The Return Triangles for the DAX are calculated for both a lump-sum investment and a monthly investment like a savings plan. For the MSCI World, the Return Triangle is only available for the savings plan, and for the EURO STOXX only for one-time investments.



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