Federal Court of Justice decision on the invalidity of cost transparency clauses in Riester retirement pension contracts
Supreme court rulings on contract clauses in the field of private pension provision are gaining increasing importance—especially against the backdrop of rising consumer interests and the continuous development of financial regulatory frameworks. With its judgment of November 23, 2023 (Case No. XI ZR 290/22), the Federal Court of Justice (BGH) delivered another significant decision regarding cost transparency and allocation in Riester pension insurance contracts. The scope of this decision extends to both providers and policyholders and may impact the future design of retirement products.
Background of the Proceedings
At the center of the dispute was a contract clause used by a provider of certified Riester pension insurance policies, which governed the initial and intermediary costs, in particular how they were charged over five years. The provision stipulated that these costs would be apportioned over the first 60 months of the policy, and in the event of early termination, the outstanding share of the initial costs would become immediately due.
The consumer bringing the claim argued that the relevant clause was non-transparent and circumvented the protective mechanisms contractually guaranteed by the Altersvorsorgeverträge-Zertifizierungsgesetz (AltZertG) (Retirement Savings Contracts Certification Act). The lower courts ruled in favor of the customer, the provider appealed, and the XI Civil Senate of the BGH was called to decide.
Legal Assessment Standard: Transparency Requirement and Protective Purpose of the AltZertG
Relevant Regulations
The BGH’s examination focused on, among other things, the transparency requirement under § 307 para. 1 sentence 2 of the German Civil Code (BGB), as well as specific consumer protection provisions of the AltZertG (§ 1 para. 1 sentence 1 no. 10 AltZertG). According to these provisions, contract partners, particularly in the area of state-subsidized retirement products, should be protected from inappropriate disadvantage due to unclear or surprising clauses.
BGH Decision
The Federal Court of Justice declared the disputed clause invalid because it failed to adequately and transparently reflect the essential statutory requirements for the allocation of initial and intermediary costs in Riester contracts. In particular, the wording created the impression for the customer that early termination would at least partially allow them to avoid incurring further costs. In fact, however, the clause meant that upon termination, the consumer would have to pay the remaining pro-rata costs immediately—regardless of the intended five-year allocation period.
In the BGH’s view, the protective aims of the AltZertG—especially the facilitation of portability and transparency—are undermined by such a clause. The obligation to proportionally allocate costs over time and clearly inform customers of cost burdens constitutes a protective mechanism that must not be circumvented or undermined in contract clauses. Furthermore, consumers must be able to understand at any time which costs they would actually bear during the normal contract term.
Implications for Providers and Contracting Parties
For providers of Riester contracts
The BGH’s decision sets a clearer framework for the design of contract forms within the area of state-subsidized retirement products. Clauses that—like here—lead to an early and lump-sum cost burden upon contract termination are now regarded by the courts as incompatible with the transparency requirement and mandatory statutory provisions.
Providers should review whether existing or planned contract templates fully comply with the transparency requirements and objectives of the AltZertG. It remains to be seen how this will impact practice, especially in light of ongoing developments and potential adjustments to supervisory regulations.
For policyholders and consumers
Customers who have taken out a Riester pension insurance policy or are considering doing so should carefully review the cost representations in their contract documents. The possibility of avoiding further costs by terminating the contract early depends crucially on whether all contract clauses comply with the statutory transparency requirements. In case of doubt, it should be considered whether the contract terms meet the strict requirements of the highest court rulings.
Context and Outlook
The current BGH judgment once again shows that consumer protection holds a high priority in state-subsidized pension schemes. The requirements for transparency and the fair allocation of costs have been further clarified and form an important guiding framework for future contract generations as well. Ongoing proceedings and further supreme court decisions may provide additional clarifications.
For all parties involved—from insurance companies to private investors—continuous observation of legal developments in this sector is crucial. These affect both existing contractual relationships and the structure of new products.
Source
The information refers to the judgment of the Federal Court of Justice dated 23.11.2023, Case No. XI ZR 290/22, published at: https://urteile.news/BGHXI-ZR-29022Unwirksamkeit-einer-Klausel-zu-Abschluss-und-Vermittlungskosten-in-einem-Riester-Altersvorsorgevertrag~N33495. Please note that ongoing adjustments of jurisprudence and legislation cannot be ruled out.
If you have questions regarding contract clauses in the field of retirement products or uncertainties as to the validity of individual provisions, the lawyers at MTR Legal Rechtsanwalt are available for personal consultation.
