The term savings plan has been used for a long time. However, it only gained weight in the late 1970s, when mutual funds became increasingly popular. How have savings plans developed and how are they actually defined?
- Savings plans mean an evenly recurring savings benefit with the same contributions.
- Fund savings plans are considered classics in terms of wealth accumulation.
- An investor can also conclude a savings plan without an agreement with the bank by regularly transferring money to a call money account via standing order.
Savings plan – a definition
A savings plan is an equal amount of savings made in regular, recurring periods. A savings plan can run for a limited or unlimited period. Some savings plans also allow extraordinary payments. Basically, the term savings plan covers everything related to regular savings. According to abbreviationfinder, ASP stands for Automatic Savings Plan.
How does a savings plan work?
First of all, the saver needs one Bank , building society, insurance company or investment company with which he has agreed a corresponding contract. This contract includes the opening of an account or contract as well as the amount of the recurring savings rate and any special features such as the duration or the option for special payments.
An investor can also take out a savings plan without an agreement with the bank. He opens one overnight money account and a standing order. With the standing order, he transfers a fixed amount to the daily money account every month – the savings plan is ready.
The bank savings plan
Bank savings plans were the starting point for all subsequent savings plans. Target account was usually a savings account . In addition to the privately initiated savings plans, there were also savings plans for capital-building benefits. However, these are no longer promoted today, only building society contracts or so-called investments in productive assets, i.e. fund savings plans, are effective.
Some institutes, above all the savings banks, offered and still offer premium savings. With this type of savings plan, depending on the duration of the savings phase, the saver receives a bonus in addition to the interest at the end, the premium. Premium savings contracts can be terminated at any time with three months’ notice. However, if the saver needs the money earlier, he has to pay advance interest.
In the course of the consequences of the financial crisis and the continuously falling interest margins, however, more and more savings banks tried to sue their customers for the high-interest premium savings contracts.
The fund savings plan
Fund savings plans are very popular. The saver selects an investment fund and regularly purchases shares in the fund. Since the fund’s prices fluctuate, but the savings are always the same, it benefits from the average cost effect in addition to the long-term price increases. If it is an accumulating fund that reinvested the distributions, this also leads to a higher return. The effect can be compared with compound interest.
Anyone looking for a fund savings plan should, however, make sure that the monthly purchase of shares is not burdened by an unnecessary front-end load.
The ETF savings plan
With the triumph of ETFs, the index funds, it was only a matter of time before they could also be acquired as part of savings plans. Even if the term “fund” applies, shares in ETFs are not issued by fund companies, but are only available on the stock exchange in traditional trading. Numerous online brokers do not charge any brokerage fee for the purchase of shares in ETF savings plans.
The Riester savings plan
The first variant of a Riester savings plan was the classic one Riester pension insurance . This has been supplemented over the years by fund savings plans, bank savings plans and Wohn-Riester. With the exception of Wohn-Riester, these are all savings plans. However, there has been a change in the market. Riester bank savings plans were only offered by a few institutes. However, most of the banks have withdrawn from this business area. The reason is the lack of profitability of the contracts for the bank, as there are no commissions. The brokerage of Riester policies is more profitable.
Riester bank savings plans were intended for people who were actually too old for a pension insurance, but who still wanted to benefit from state funding.
The Rürup savings plan
In its beginnings was that Rürup or basic pension only available as a classic pension insurance. Similar to Riester, it took a moment for the legislature to learn and to allow the state support for a Rürup pension within the framework of fund policies and pure fund savings plans.
Savers can pay a maximum of 24,000 euros into a Rürup pension per year. The tax deductible rate increases annually until the full amount of the expenses is recognized for tax purposes from 2025. Conceived as an option for the self-employed and those with higher incomes, the Rürup pension is also worthwhile for those earning an income of EUR 30,000 or more.