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Because of lower fertility and the various advances in terms of medicine, the number of people over 60 will have raisen from 500 million in 1990 to about 1.4 billion in 2030. If seen on a global scale, the issue of population ageing may give rise to various economic problems. As compared to when life expectancy was still relatively low, a large portion of the population will have claims to a share of a particular output in spite of not being about to provide labour sufficient enough to maintain their incomes. One of the major issues in both advanced and Third World countries will then involve how to organize this type of system while retaining economic growth and efficiency. In taking the political and financial risks into account, the resulting option as well as its consequences for pension fund development will significantly affect the financial system's structure.

This chapter explores the critical role of institutional investors as fiduciaries and in the governance of public companies. These institutions have more frequently encountered agency conflicts as the complexities of their businesses (managing pension funds, mutual funds, and 401ks of various types for both corporate and individual accounts) and competitive pressures have increased. They are powerful players in exercising control rights. As an industry, they can make the difference between governance successes and failures.

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.

The Netherlands departed from the Bismarckian social insurance tradition by combining flat-rate public basic pensions with quasi-mandatory, funded occupational pensions with near universal coverage. The emergence, expansion, and reorganization of occupational pensions show their close integration with the public pension scheme. Many efforts helped expand and improve coverage through collective agreements by employers and trade unions. Short case studies of pension funds in the public and private sector highlight the core features of the Dutch system as well as its institutional variation. In the wake of the financial crisis, occupational pensions were scaled back since these defined-benefit (DB) pensions were threatened by underfunding. Current debates question the future viability of the Dutch system in an era marked by both demographic ageing and volatile financials.

This chapter discusses pension reform in Argentina. Argentina instituted a major pension reform in 1994 following an extremely serious macroeconomic crisis. Partly inspired by Chile's experience, it replaced its PAYGO system with a mixed model that incorporated elements of both public and private systems. It is argued that the pension reform was actually a combination of four separate but interdependent reforms: a number of parametric changes, which resulted in stricter requirements for receiving benefits; a shift from a DB formula tying benefits to previous earnings to a DC structure; a re-introduction of a funded scheme; and a set of institutional changes that created both pension fund management firms and public supervisory agencies. Coverage rates as well as indirect economic effects, such as the impact on capital and labour markets are considered, and key policy challenges with respect to coverage, institutional design and efficiency, and system fragmentation are reviewed. While these issues were exacerbated by the 2001-2 financial crisis, it is shown that the pension funds have produced reasonable returns over time.

This chapter evaluates some of the key issues in the regulation of pension funds through comparing and contrasting the experiences of the countries studied here and the solutions they have implemented. As the fundamental determinant of total precautionary retirement saving relies on the scope of the provision of social security, the regulatory and the fiscal environment that affects the use of pension funds serves as the vehicle for saving. The chapter first looks into the justifications for financial regulation and how these may be applied to pension funds. As it examines the major regulatory issues that affect both the assets and liabilities associated with pension funds, it also attempts to summarize what comprises ‘good regulatory practice’.

Pension funds are among the most important institutions in certain national markets. They are usually sponsored by non-financial companies, which collect and invest funds on a pooled basis for eventual payments to members in the form of pensions. This chapter introduces the main economic issues that concern pension funds. It provides definitions and general attributes of pension funds, develops the economic view of pensions funds as retirement-income insurance, evaluates how pension funds relate to saving, explores how the labour market is affected, examines the adequacy of retirement income, and considers the link between pension funds and various aspects of finance.

This chapter discusses the situations of twelve major countries that are members of the OECD — the USA, the UK, Germany, Japan, Canada, the Netherlands, Sweden, Denmark, Switzerland, Australia, France, and Italy — and compares the fundamental features of their private pension funds as well as considering how these are related to social security. It attempts to examine the key reasons that would explain why the development of private pensions in these countries is at different levels while providing policy-makers with possible alternatives to impose such developments in their own countries. It also examines pension funds' relative sizes, the factors that bring about the said differences, the details regarding the structure of retirement-income pension, the contribution of pension funds, and some of the measures for reform.

This chapter reconstructs developments of EC law (including case law) relating to social protection, and traces the differential impact that free movement and competition rules have had on the various functional schemes and tiers or pillars of provision within national welfare states. It also identifies and illustrates the new strategies of spatial politics prompted by the boundary redefinitions operated by the EU, focussing on pensions (including pension funds), health care, and social assistance. Special attention is devoted to the position of third country nationals.

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.

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 presents a map describing the new spatial architecture of social protection in the European Union resulting from free movement and competition rules, and their effects on traditional welfare state boundaries. The destructuring consequences of the new boundary configuration are discussed, with specific reference to pensions systems and the issue of migration. The chapter concludes by highlighting the margins of manoeuvre for a possible “nesting” of nation-based forms of social protection in a wider EU space, capable of promoting adaptation and reform, while upholding at the same time the basic pre-conditions for maintaining adequate levels of social protection.

This chapter examines how public pension funds can be shielded from government inference in the investment process, and reviews initiatives developed in Canada, Ireland, Japan, New Zealand, and Sweden. It highlights a number of good practices not commonly observed in most public funds. These include explicit funding targets and mechanisms to trigger action in case of deviation from objective, commercial investment policies aimed at maximising risk-adjusted returns, and professional boards selected through process that maintain distance from government officials.

The chapter first reviews the emergence and change of the public–private pension mix in Germany, emphasizing the path-dependent but recent path-departing developments from the Bismarckian social insurance tradition. The politically contentious pension reforms of the 1990s and subsequent reforms in the 2000s followed a strategy of institutional layering by introducing a voluntary personal (‘Riester’) pension, while fostering coexisting occupational pensions. At the same time, the reforms of public pensions made voluntary private pensions necessary for status maintenance in old age. The second part analyses the structure and governance of occupational and personal pensions in Germany, highlighting the new instruments for the design of occupational pensions such as collective agreements and collective pension institutions self-administered by employers and trade unions. The chapter concludes with an outlook on the future, discussing potential scenarios for institutional change and its consequences for old age income in Germany.

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.

Following the Bismarckian social insurance tradition, the post-war pension system of France has been characterized by occupational fragmentation, its strong reliance on pay-as-you-go financing, and by the direct involvement of employers and trade unions in their management. Generous benefits offered a combination of statutory public pension and mandatory occupational pensions, initially crowding out any funded private pensions. However, pension reforms that promoted retrenchment both in the two pay-as-you-go-financed statutory public and occupational pension schemes since the 1990s have resulted in the gradual development of funded private pensions. In recent years, the governance of mandatory occupational schemes has been harmonized and inequalities between different occupational categories have been reduced. While the regulatory framework governing voluntarily funded plans (both occupational and personal pensions) has been largely unified, access to these schemes remains mostly limited to high-skilled employees.

Finland's pension system consists of income-tested ‘national pensions’ and statutory employment-related pensions. The latter are ‘hybrid’ public–private pensions that were legislated in the 1960s and partly funded through private insurance companies, while employers and trade unions participate in their administration. There is a strong corporatist element: the social partners have been owners of the statutory schemes, therefore they channelled improvements through ‘their’ own schemes, not via voluntary private pensions as elsewhere. Since the mandatory employment-related pensions are income-related with no ceilings, the high-income earners have had no incentives to contract voluntary supplementary pensions. However, this is changing through piecemeal institutional change: as statutory pension promises are cut back, an expansion of voluntary occupational and individual pensions occurs.

This chapter summarizes core controversies about pensions by focusing on ten persistent myths about pension design that have clouded discussion, many of them centred on the debate about the respective merits of funded pensions (in which today's pensions are paid out of previously accumulated contributions) and Pay‐As‐You‐Go arrangements (in which today's pensions are paid out of today's contributions). Analysis of pensions needs to draw on microeconomics, macroeconomics, financial economics, and an understanding of the theory of social insurance. Many of the myths – relating to demographic change, savings, economic growth, public spending, and labour supply – are based on analysis that is incomplete because it omits one or more of these components.

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.