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The Swedish pension system developed through different stages from the establishment of the first statutory basic pension, the introduction of an earnings-related supplementary pension, and collectively negotiated occupational pensions to the most recent institutional change. A comprehensive pension reform was finally decided in 1994 which led to a switch to an earnings-related insurance with notional defined-contribution (NDC) and a mandatory funded personal pension component (premium pension). In the second pillar, occupational pensions negotiated by employers and trade unions came under financial pressures due to the decline of industrial employment, which led to some restructuring such as the gradual switch from defined-benefit (DB) to defined-contribution (DC) pensions. The chapter also examines the governance and design of these occupational schemes as well as personal pensions.

Denmark developed a multipillar pension system, adding private pensions to its universal flat-rate, tax-financed ‘people's pension’. Following the failure to introduce a public earnings-related supplementary pension, fully funded ‘labour market’ pensions were added through collective agreements between employers and trade unions, extending these occupational pensions to nearly all employment groups since the early 1990s. Comprehensive institutional change took place almost without any legislation by non-state actors, except for the reform of the public basic pension which became increasingly means-tested. Private pension governance is typically left to pension funds or to special life insurance companies jointly owned and controlled by unions and employers. Strict rules protect pension funds against financial shocks, but these were eased during the financial crisis to improve returns on these defined-contribution (DC) pensions. Nevertheless, the Danish pension system looks quite satisfactory from both an economic and social policy perspective.

Pensions differ in the way they are financed, in the relationship between contributions and benefits, and in how both are adjusted as the economic and demographic environment changes. Some features are generally found only in public pension systems; others are common to both public and employer-based systems. The chapter then introduces a recent development, notional defined-contribution pensions, which combine some of the traditional features in a novel way. Finally, the chapter briefly delineates the main areas of controversy with respect to the choices among these features.

The British pension system with a meagre basic pension in the Beveridge tradition and coexisting private pensions that have increasingly been transformed from defined-benefit (DB) to defined-contribution (DC) pensions has generally been viewed as consistent with the liberal welfare and production regime types. While this classification is appropriate for some elements, from the 1950s onwards a strong statist side was expressed through the role of the state as employer and as regulator, with important consequences for the scale of state provision and the coverage and governance of occupational provision. The dynamics set in place by these arrangements lie behind recent pension reforms. These serve to enhance the hybrid pension system, moving it in a clearly more social democratic direction. However, the financial crisis and the change of government in 2010 mean that this movement might now be halted even before it had really begun.

This comparative chapter by Ebbinghaus and Wiß analyses the governance of supplementary pensions in ten European countries and the scope for state intervention or collective regulation by employers and trade unions. Private occupational and personal pensions combine different features in terms of coverage, benefits, funding rules, supervision, and administration. While the state partially retreated from the public responsibility to finance sufficient and adequate pensions, the need for and importance of state regulation and societal control of private pensions increased. Societal actors like trade unions, employers' associations, and financial services became more important in governing pension systems. Since the pension beneficiaries rely as principals on agents with more financial knowledge, regulation should decrease asymmetric information and limit uneven power distribution. The more pensions are privatized and funded, the more a financial crisis can increase risks for old age income security.

This comparative chapter by Ebbinghaus and Neugschwender discusses the institutional differences in the public–private mix, distinguishing mature from emerging multipillar systems and hybrid from dominantly public pension systems. It focuses on exploring the interaction between income inequalities in working life and pension system features for old age income. In particular, it considers the first tier of minimum income support, the public and private second-tier earnings-related pensions, and the particularities of private pensions. The empirical analysis compares poverty rates over time and across countries, discussing the impact of public pensions. The further analysis reveals variations in the recipient rate and income share of private supplementary pensions among the elderly. The importance of mandatory or negotiated occupational pensions in order to reduce inequality in multipillar pension systems is evident in addition to the role of public minimum income protection for poverty reduction.

Switzerland is considered a prototype of a multipillar pension system, including both public and private, pay-as-you-go-financed social insurance and mandatory funded occupational pensions. As many European countries introduced supplementary funded pensions over the last decades, Switzerland has become an instructive case for policymakers looking for lessons in pension fund governance, in particular concerning underfunding and guarantees in defined-contribution (DC) pensions during financial crisis. However, the Swiss case does not provide a simple blueprint of effective regulation: regulation of supplementary pensions not only involves employers and trade unions but it also entails constant political renegotiation. Moreover, the Swiss case also demonstrates the difficulties of effective regulation because governance practice tends to deviate from the formal rules both to the detriment and to the advantage of the sponsors, insured, and benefit recipients.

This chapter sets out a series of recommendations to strengthen the pension system of China in ways compatible with China's capacity to implement reforms effectively. It first discusses overall structure and administration. It then considers options for the basic pension, individual accounts, and voluntary pensions, respectively. The chapter also discusses issues connected with the age of retirement, and finally it considers ways of extending coverage to more of the population.

The primary objective of pensions is economic security in old age, achieved through consumption smoothing, insurance, poverty relief, and redistribution. The primary objective of pension design is to optimize old-age security, including the cost of providing it. Pensions can be arranged in different ways, relating to (a) the degree of funding, (b) the relationship between contributions and benefits, and (c) the way benefits and contributions are adjusted over time. The setting for analysis of pensions includes the central role of output, and the facts that imperfect consumer information and decision making are widespread; pension systems face large risks, including economic, demographic, and political risks; and potentially administrative costs can be very high.

The chapter examines how workers’ attitudes about money and retirement planning influence their participation in defined contribution (DC) pension plans. Workers were grouped into five “money attitude” clusters. Individuals showed difference preferences for the types of planning activities needed to be successful in conventional DC plans.

Risk disclosure for the insurance industry will be profoundly influenced by Solvency II rules, which embody the new approach to enhance transparency in the European insurance sector. Yet this chapter shows that efforts to extend these reforms to occupational pension funds will confront considerable difficulties. After outlining the recent EU reforms in prudential regulation for insurance undertakings and occupational pension funds, we compare both sectors and describe how differences between both types of institutions might justify differences in risk disclosure. Because of the growing importance of defined contribution pension schemes, risk disclosure for workplace pensions is important for plan sponsors as well as participants bearing investment and biometric risks. Moreover, it will be increasingly valuable for defined benefit pension sponsors and participants seeking to know if their pension funds will ultimately be able to deliver on the retirement promise.

This chapter discusses target-date funds (TDFs) and funds-of-funds. The use of TDFs is growing rapidly in defined contribution pension plans. TDFs provide a “one-stop shop” for investing for unengaged plan participants. TDFs have grown in the United States since being included in the safe harbor provisions in the Pension Protection Act 2006. A key feature of the target-date approach is life-cycle investing, which involves a switch in asset allocation from equities and other growth assets to bonds as the expected retirement date approaches. This glidepath can be managed to or through the retirement date in which case it keeps evolving after retirement. The glidepath can be strategic or managed dynamically. Some plan sponsors specify their own custom glidepath to suit particular plan participants. TDFs are structured as funds-of-funds, but other funds-of-funds are also available where the asset allocation does not follow a glidepath.