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MONEY

Trade unions call for more financial help for German pensioners 

Leaders of senior citizen groups in trade unions are calling for more financial assistance for pensioners in Germany in light of the rising cost of living. 

An elderly woman counts money.
An elderly woman counts money. Photo: picture alliance/dpa/dpa-tmn | Christin Klose

In the last two months, the German coalition government has put together two relief packages to ease the financial burden of the cost-of-living crisis on German households. 

However, the Macroeconomic Policy Institute (IMK) recently found that pensioners are one of the groups that will benefit the least from these measures. There are now calls for the government to afford special relief to pensioners. 

READ ALSO: Who benefits the most – and least – from Germany’s energy relief measures?

Around 1.2 million pensioners in Germany belong to the German Federation of Trade Unions. 

The Federal Senior Citizens’ Representative of the German Federation of Trade Unions (DGB), Klaus Beck, recently told the Redaktionsnetzwerk Deutschland (RND) that the planned energy price lump sum of €300 should not only be paid to those in employment but also to retirees and pensioners.

The fact that pensions are due to increase by more than five percent on July 1st does not count, he said. “Hubertus Heil (Federal Minister of Labour) is kicking the pensioners in Germany hard in the shins with this argument. The pension increase is fixed by law, it is based on the collective wage agreements of the past years.” 

READ ALSO: Germany announces biggest pension hike in decades

Last week, Schleswig-Holstein’s Minister of Economics, Bernd Buchholz, also called for the one-off lump sum to be given to non-taxpaying pensioners. 

“Pensioners are also affected by rising costs, but a large proportion of them hardly benefit from the measures in the relief package,” he told the German Press Agency.

The chairwoman of the federal senior management of the Railway and Transport Union (EVG), Annegret Pawlitz, also called for swift action to ease the financial burden on pensioners.

“Many pensioners live in rural areas and are particularly affected by rising fuel and energy prices. The flat-rate relief must come urgently,” she told RND.

Esken: Relief package ‘will benefit pensioners’

The traffic-light coalition has rejected claims that pensioners have been forgotten in its two energy relief packages.

Writing on Twitter a few days after the latest package was announced, Saskia Esken, co-leader of the SPD, said the measures were designed to be “broad-based” and to “reach those who need support as quickly and precisely as possible”.

“Many measures benefit everyone, including pensioners and students/apprentices, and some also benefit businesses,” she wrote. “These include the EEG levy, which permanently reduces electricity prices, while less fuel tax and subsidies for public transport tickets reduce mobility costs for three months.”

According to Esken, pensioners on low incomes will benefit from a €200 heating allowance for people who receive housing benefit or basic income support (Grundsicherung).

They should also see more money in their pocket due to an increase in the annual tax-free allowance and various other tax breaks, she said. 

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MONEY

Why German bank customers could soon pay less for their account

A major German bank is set to scrap fees on large balances - and a number of others look set to follow. Here's why people in Germany may be paying less for their savings or current account in the near future.

Why German bank customers could soon pay less for their account

What’s going on? 

Interest rates have been at rock-bottom levels for years, making it much harder for people to get returns on their savings.

In recent years, many banks have even been levying what’s known as negative interest rates on customers. If interest normally incentivises people to save by helping them to grow their money, negative interest basically does the opposite.

If you have a certain amount of money in the bank, your bank will charge you negative interest via a deposit holding fee, which will usually be a certain percentage of your balance.

With N26, for example, balances of over €50,000 are subject to a 0.5 percent fee each year. For a balance of exactly €50,000, that equates to €250 in bank charges just for keeping your money there. 

Some banks even charge a deposit holding fee for balances as low as €5,000 or €10,000 in a current account. 

On Tuesday, ING Deutschland became the first bank to announce that it would be scrapping negative interest rates for the vast majority of its customers.

From July 1st, new customers of ING will be able to deposit up to €500,000 in their account without being charged for it, while existing customers will automatically have the fee-free amount raised to €500,000 from the current €50,000. 

Now, it seems a number of other German banks are planning similar moves. 

Why is ING Deutschland ending the holding fee?

Not entirely out of the goodness of its own heart – though that doesn’t stop it being good news for customers.

The European Central Bank (ECB) is set to make a decision on interest rates in the bloc this July, and most people expect that the bank is poised to increase interest rates from minus 0.5 percent to zero. 

Since banks have basically been passing on the ECB’s fees to their own customers, a hike in the ECB’s interest rate would spell the end of most negative interest-rate accounts in any case. But ING Deutschland said it wanted to pass on the positive interest rate trend to its customers even earlier.

READ ALSO: EXPLAINED: How to save money on your taxes in Germany

“With the increase in the fee-free allowance for credit balances on the current and extra accounts, the deposit fee is no longer applicable for 99.9 percent of our customers,” said Nick Jue, chief executive officer of ING in Germany. “We were one of the last banks to introduce a deposit holding fee and one of the first to virtually abolish it.”

He added that the bank had already kept its promise to abolish the holding fee for almost all customers before the European Central Bank made its decision.

Does this have anything to do with that court decision on bank charges?

That’s definitely a factor. According to a decision in Germany’s Federal Supreme Court last year, credit institutions have to obtain the consent of their customers when making changes to their fees and conditions.

That means that financial institutions have to ask for consent to current fees retrospectively if they don’t want hoards of people trying to claim their money back.

If a customer doesn’t consent to the fees, the bank will usually close that customer’s account.

Man signs a contract

A man in a suit fills in an official form. Photo: picture alliance/dpa/Pixabay | hnw-Gruppe

According to ING Deutschland, the scrapping of negative interest rates on balances up to €500,000 may help to sway those customers who have not yet agreed to the latest terms and conditions – including the deposit holding fee.

Anyone who agrees to the Ts&Cs will automatically be given the higher allowance as of July 1st.

“ING Deutschland expects that the increase in the allowances will convince in particular those customers who have not yet agreed to the General Terms and Conditions including the holding fee, and that the bank will thus terminate fewer customers than last planned,” ING said in a press release. 

READ ALSO:

What other banks are planning to do this?

According to reports in Bild and Bialo, the other banks planning on ending negative interest rates (or raising the threshold for fee-free balances like ING Deutschland has done) include:

  • Deutsche Bank
  • Commerzbank
  • Deutsche Apotheker- und Ärztebank (Apobank)
  • Dortmunder Volksbank
  • Hamburger Sparkasse (Haspa
  • Frankfurter Sparkasse
  • Frankfurter Volksbank
  • Mittelbrandenburgische Sparkasse
  • Nassauische Sparkasse (Naspa)
  • Ostsächsische Sparkasse Dresden
  • Sparda-Bank München
  • Sparda-Bank Südwest
  • Sparda-Bank West
  • Sparkasse Hannover
  • Sparkasse Pforzheim Calw
  • Volksbank Stuttgart

What does this mean for my savings?

There’s good news and bad news.

The good news is that, from July, you’ll no longer have to pay exorbitant charges just to store your money in a safe place – and you won’t be penalised for saving more. The bad news, on the other hand, is that low interest rates aren’t going away anytime soon.

So while you won’t be losing money hand over fist, you won’t be earning much of a return on your savings either.

Banks in Frankfurt

Skyscrapers in the financial district of Frankfurt am Main. Photo: picture alliance/dpa/dpa-Zentralbild | Fernando Gutierrez-Juarez

“If the interest rate environment continues to develop positively, we will also let our customers participate in this development,” said ING Deutschland’s Nick Jue. “However, the low-interest phase will continue for the time being and broadly diversified investments will remain important.”

Getting a securities account where your money is invested is one way to try and grow your savings, as is investing in property.

Of course, people with mortgages and other loans benefit from the low interest rates – which could be why the German property market is currently booming. 

READ ALSO: Five ways Germany’s soaring inflation could affect your life

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