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Net Policies: The Holy Grail of Retirement Planning? What Really Lies Behind It.

  • 1 day ago
  • 4 min read




In financial advisory, there is a trending buzzword: The Net Policy (Nettopolice). It is often considered the gold standard for cost-efficient retirement planning because it contains no acquisition commissions. However, "Net" does not always mean "Net." Different cost models and calculations exist in the market.

Before you decide on a fee-based tariff, you should understand the mechanisms. Ultimately, it is not the name of the tariff that determines your investment success, but the concrete mathematical effect of the costs on your final capital.


The Checklist: The Three Cost Levers

If you are offered a net policy, it is worth looking at the following three mechanisms. These determine how efficiently the contract actually operates.


1. The Fee Agreement (Transparent & Separate) With a net policy, the insurer pays no commission to the intermediary. Compensation for the advice takes place directly between the client and the advisor.

  • The Function: The fee (Honorar) is paid separately (flat rate or based on effort).

  • The Effect: Since no acquisition costs are deducted from the contract balance, your savings rate (minus administrative costs) flows into the capital investment from the very beginning. The compound interest effect starts earlier.



2. Handling Kickbacks (Trailer Fees) Many investment funds contain so-called internal commissions (Kickbacks) in their ongoing costs (TER). Insurers handle these differently in net policies:

  • Model A (Refund): The insurer collects the kickbacks but credits them back to your contract balance. This lowers the effective fund costs.

  • Model B (Clean Shares): The insurer uses special "commission-free tranches" (Institutional Classes). No kickbacks accrue here at all; fund costs are lower from the start.

  • Model C (Retention): The insurer uses funds with kickbacks and retains them as part of its margin.



3. The Gamma Costs (Ongoing Administration) In addition to fund costs, administrative costs arise at the insurance level. A distinction is made between two types:

  • Distribution Gamma: An ongoing trail commission for the caretaker. This is usually completely eliminated in genuine net policies.

  • Administration Gamma: The insurer's costs for administration.

  • The Comparison: The amount of these administrative costs varies greatly depending on the provider. There are providers with very lean cost structures (e.g., fixed unit costs) and providers with higher percentage-based administrative costs.



Market Overview: Different Calculation Models

Not everything labeled "commission-free" contains the same cost structure. The industry generally distinguishes between two calculation approaches:


A. The "True" Net Policy This tariff is completely cleared of distribution costs.

  • No acquisition costs (Alpha).

  • No ongoing distribution compensation (Distribution Gamma).

  • The advisor's compensation occurs exclusively via the separate fee.



B. Net Tariffs with Increased Administrative Costs In this variant, the insurer forgoes the acquisition commission but calculates with higher internal administrative costs than in Variant A.

  • The Impact: The advantage of the missing acquisition commission remains. However, the higher administrative costs reduce the return slightly more than in a tariff with minimized administrative costs.


Decision Aid: Which model makes more sense for you cannot be said across the board. A tariff with higher administrative costs can still be attractive if, for example, it offers better fund selection, higher guaranteed pension factors, or better flexibility. Only a mathematical comparison helps here.



The Product Behind It: Cost Structure Is Only One Building Block

Important to understand: "Net Policy" is not a product category, but a cost structure. It is like buying a car: The question of whether you lease or buy (financing) the car says nothing about whether the engine is powerful.


Behind a net policy, there can be:

  • An ETF Pension Insurance.

  • A tax-subsidized Basic Pension (Rürup) or Company Pension (bAV).

  • A classic pension insurance with guarantees.


A favorable cost structure is the foundation, but investment success depends equally on the quality of the chosen funds and the tax conception.




A Look at the Legal Situation (BGH Ruling)

Why is the individual examination of costs so important? Because the legislator has left the market largely free.


A look at history shows a ruling by the Federal Court of Justice (BGH) from January 20, 2005 (III ZR 251/04). At that time, the court stated that even higher commissions (7.8% in the negotiated case) are not automatically unconscionable (sittenwidrig) as long as the service and disclosure are correct.


What does this mean for you today? It means: There is no legal price cap for financial products. Whether a Gross Policy (with commission) or a Net Policy (with fee) is economically more sensible for you depends on your investment amount, the duration, and your personal preference. Both models are legal and have their justification in the market.




Conclusion: Calculate Instead of Estimate

Deciding on a net policy is often economically sensible, especially for long-term savings processes, as the compound interest effect is not slowed down by initial costs.


However, the term "Net" alone replaces no examination.

  1. Kickbacks: How are these offset?

  2. Admin Costs: How high are the insurer's running costs compared to the market?

  3. Overall Package: Does the investment strategy fit your goals?


At Karmartha, we use specialized analysis software to answer exactly these questions. We compare the mathematical effect of the various cost models on your personal final capital—so you can decide based on facts.





Sources & Further Links





Legal Notice regarding this Article


General Information: This article explains the functioning of net policies (fee-based) and gross policies (commission-based). The cost structures mentioned serve to illustrate market mechanisms.


No Legal Advice: The citation of the Federal Court of Justice (BGH) ruling serves for historical context and does not constitute a legal assessment of current contracts.


Individual Assessment: Whether a net policy (with a separate fee) or a gross policy (with commission) is more favorable for you depends on the investment amount, the duration, and your tax situation. This must be calculated on a case-by-case basis.

 
 
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