Anyone able to remember Paul McCartney crooning to “When I’m 64” is also likely to be well into their sixties by now. As the character in the Beatles’ hit contemplates what the future may hold, the average person in Germany can expect to live many years past the age of 64. This is because the remaining life expectancy of 65-year olds in Germany is currently 18 years for men and 21 for women. Mathematically, this means that people entering retirement in Germany can expect to enjoy another two decades of adult life.

In BaFin’s guide to investing for people in retirement (“Geld anlegen im Ruhestand”), BaFin Chief Executive Director Elisabeth Roegele noted that, for most of us, entering retirement also marks a financial turning point. Whether someone needs money for their dream holiday or to cover unexpected health costs – both the upsides and downsides of life are influenced by our financial situation. In addition, the world of finance is increasingly advancing into the world of digitalisation. This is why being able to access banking or insurance services is one of the biggest financial challenges facing older people alongside issues such as the amount of household income available per person and protection against fraud. “Senior citizens must be given unobstructed access to financial services, also in times of rapid digitalisation”, said BaFin President Felix Hufeld.

Analogue versus digital

While it is still possible for consumers to manage their current accounts and insurance policies without using digital technology, it can be a huge challenge for older people if a bank branch closes in their neighbourhood. Alternative solutions, such as withdrawing cash at the supermarket checkout, can only compensate for this to a limited extent. “It is important that older people continue to have access to the market – whether by analogue or digital means“, said Hufeld.

In order to guarantee the financial inclusion of senior citizens or, conversely, prevent their digital exclusion, it is necessary to ensure that consumers are well-informed and to have both the right regulatory framework and vigilant supervision.

Regulatory response

“We, here in Europe, need to invest more time and energy in our efforts to find an appropriate regulatory response to the issues we will inevitably face“, said Hufeld during an event in Berlin at the end of October 2019 in his review of the G20 symposium in Tokyo. The demographic challenges facing Japan as a result of its low birth rate and high life expectancy was a key topic at the meeting bringing together the representatives of the world’s 20 leading industrialised and emerging economies.

Recent EU legislation does not account for age as a criterion based on which a distinction between consumers may need to be made. Neither the Markets in Financial Instruments Directive II (MiFID II) nor the Insurance Distribution Directive (IDD) stipulate that those selling a financial instrument or insurance are required to gear their advice to the customer’s needs based on their age. Even so, both MiFID II and the IDD are aimed at ensuring that consideration is given to the individual needs of customers when an appointment to discuss investment options takes place and when subsequent investment recommendations are made. This naturally excludes a 30-year horizon as possible recommendation for an 80-year-old, for example.

Consumer information provided by BaFin

Ideally, customers will know which investments are suitable for their needs because they will have already obtained information, for example directly from BaFin. Among the brochures that have been published, BaFin’s investment primer written in simple language (“Das kleine ABC der Geldanlage in Leichter Sprache”) has become a bestseller that is popular with all age groups and educational levels. This shows that there is a high demand for information about financial matters in clear and simple language. Hufeld also believes that “financial markets need to remain understandable.”

BaFin has published a brochure that is aimed specifically at older readers. The BaFin guide to investing for people in retirement (“Geld anlegen im Ruhestand”) discusses a range of financial instruments and their suitability – from current accounts (“not the best financial product for saving money”) and overnight accounts (“also suitable as an emergency reserve“) to securities (“higher investment risk, better earnings prospects“). Like insurance, all these products are also available online.

Secure access to the internet is the main theme of meet-ups run by Digital-Kompass, a project supported by various senior citizen and consumer protection organisations. BaFin’s experts have also taken part in such a meet-up where they provided information on the digital transformation of the financial industry. Virtual currencies, robots that make investment recommendations (known as “robo-advisers”), motor insurance based on a person’s style of driving or crowdfunding platforms have been a reality for a while now. As the starting point for activities and transactions on the internet, online banking continues to play a major role. With 79 per cent of 60- to 69-year-olds and 45 per cent of those over 70 now online, it is becoming increasingly important to ensure that they are able to take advantage of various services such as real-time transfers and that risks such as data theft are reduced as far as possible.

BaFin’s role

For this reason, BaFin issues regular warnings about dubious activities, for example, when companies are conducting banking business or providing financial services without the required authorisation. In early December 2018, BaFin and the police had already warned against fraudulent international online trading platforms that attempt to woo customers with the prospect of high returns by persuading them to invest in speculative financial instruments such as contracts for difference (CFDs). The information on the costs for using such platforms is unclear, leaving customers unable to make profits. Fraudulent trading platforms care little about the age of their victims. What makes the activities of these online criminals particularly insidious is the way in which they make it particularly easy for consumers to gain access to these dubious platforms.

“In serious cases, we can, as a last resort, restrict or even prohibit the sale of products or certain sales practices – in the case of CFDs, we recently decided to impose stronger restrictions”, said Elisabeth Roegele after the BaFin Consumer Protection Forum with reference to BaFin’s general administrative act on CFD.

Right to a basic payment account

Basic payment accounts are not restricted to a specific group of people. In fact, the German Payment Accounts Act (Zahlungskontengesetz – ZKG) grants all consumers legally residing in the European Union the right to hold a payment account with basic features, thereby enabling them to deposit or withdraw money and carry out direct debits, transfers and payment card transactions.

People who were unsuccessful in concluding a basic payment account agreement with a bank can file an application to BaFin in order to request the initiation of administrative proceedings or make use of the online complaints form provided. Once this step has been completed, BaFin checks whether the bank had reasons to refuse to set up the account. There are very few cases in which a bank may make such a refusal, for example if the applicant already has a payment account at another bank in Germany or has committed a criminal offence against the bank. If no such grounds exist, the bank must set up the basic payment account. As a general rule, all banks must set up a basic payment account if a consumer wishes to open such an account – this applies, of course, even if the consumer is 64.