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This is the first of three chapters on the distinctive policy dynamics of particular areas of social provision. In their chapter on the dynamics of pension reform, Myles and Pierson stress a key feature of public pension systems: the fact that the implications of policy choices only play out over a very long period of time. Almost all pension systems are undergoing major reforms, yet choices made twenty‐five or fifty years ago profoundly shape the nature of the reform options available now. Most countries are severely constrained in their options by the accumulated commitments from decades of experience with social insurance; only where countries failed to develop large pay‐as‐you‐go pension systems at these earlier junctures has the much‐heralded alternative of introducing extensive funded arrangements proven to be a viable option. Myles and Pierson also emphasize the need to legitimate often politically painful revisions to this key element of the post‐war social contract — while there has been major change everywhere, in almost all countries this has required broad negotiations, including left‐of‐centre parties and/or labour unions.

This chapter analyzes pension reform in Peru. Peru's reform introduced private savings accounts while maintaining a fiscally unsustainable public pillar that must eventually be fixed. A number of factors led to the slow acceptance of the new system, including the fact that workers had more incentive to remain in the old PAYGO system, which offered a lower contribution rate, a lower retirement age, and a minimum pension guarantee. However, eventual adjustments allowed the new system to compete more effectively for workers. The performance of the Peruvian system with respect to investment, fees, competition, and coverage is analyzed, and it is argued that reducing political interference is crucial to its future success.

Over the past two decades many countries have adopted multipillar pension systems that include both a public DB and a private DC pillar. Critics of these pension reforms argue that the tight link between payroll contributions and benefits in the DC pillar produce lower pensions for women. In contrast, supporters of these reforms argue that multipillar systems remove distortions that favour men and permit a more targeted public pillar that help women. This chapter examines the differential impact on genders of the new and old systems in Chile, Argentina, and Mexico. In all three cases, the new social security system includes two mandatory components: privately managed funded individual accounts (DC) and a publicly managed and financed safety net. Women accumulate retirement funds and private annuities from the DC pillar of the multipillar systems that are only 30-40% of those of men. This effect can be mitigated by introducing two critical elements into the new systems: (a) targeting the new public pillars toward low earners, because the majority of low earners are women, and (b) restricting payout provisions such as joint annuity requirements. With these modifications, total lifetime retirement benefits for women would reach 60-80% of those for men. For ‘full-career’ married women, they would equal or exceed benefits of men.

This chapter describes Brazil's social security system and the highly contentious reform process. While much of the rest of the South American region moved toward individual accounts, Brazil engaged in parametric reforms. Recently, the country introduced the fator previdenci ário, a system akin to a notional DC system, whereby contributions and benefits are strictly linked but contributions do not go into individual-funded savings accounts. Although a few political leaders have favoured private accounts, individual accounts never received much political support, and the transition costs are considered potentially prohibitive, reaching as high as 201% of GDP. Structural reform is complicated by the fact that the social security system is codified in the 1988 constitution, which means that any structural reform needs to go through the laborious and politically costly constitutional amendment process. It is argued that administrative and legislative reforms that would make the system more efficient and equitable are possible even when support for constitutional reform is lacking.

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 begins by presenting Estelle James' points of discussion if she were to cowrite a sequel to Averting the Old Age Crisis. Truman Packard then summarizes some of the issues raised in Keeping the Promise of Social Security in Latin America and highlights the most important points for pension policymakers. In particular, this chapter addresses the issues of low coverage and the expected outcome of pension reforms. The World Bank's framework for pension systems and reform is discussed.

This is the second of three chapters on the implications of electoral politics and the design of political institutions for welfare state adjustment. Bonoli explores the relationship between political institutions and patterns of welfare retrenchment, both on a theoretical level and on the basis of the observation of welfare reforms adopted in countries characterized by different levels of institutional power concentration. The main empirical focus is on Britain, an exemplar of strong power concentration, Switzerland, which has a political system characterized by high levels of power fragmentation, and France, an intermediate case. For each of the three countries, narrative accounts are provided of how selected welfare reforms (pension reform in all three countries and unemployment insurance reform in Switzerland) have been adopted. The comparison suggests that the relationship between constitutional structures and welfare adaptation is not a linear one, whereby power concentration is directly linked to a higher or lower rate of success in achieving restructuring, or to the amount of restructuring that can be obtained. Power concentration does, however, appear to be related to the form that welfare state adaptation takes: in contexts of strong power concentration, reform tends to be unilateral and geared towards retrenchment; in contrast, in institutional contexts characterized by veto points, reform tends to combine measures of retrenchment with expansion and improvements of existing programmes.

This chapter describes Uruguay's 1995 pension reform, which is based on a multipillar or mixed, system, with contributions and benefits linked to both a state-managed PAYGO system and privately managed individual savings accounts. Since its implementation, the reform faced challenges arising from its design, turbulent financial markets, and difficulties with respect to political and social acceptance. The new pension system emerged in good condition after the country's worst financial crisis, which happened in 2002. The system now faces renewed political challenges after the election of a political coalition that had opposed the creation of the new mixed system. However, the lack of a viable alternative to the 1995 reform suggests that current policies will be maintained, though it is likely that policymakers will make advisable and necessary adjustments.

This chapter by Ebbinghaus and Gronwald provides a comparative historical analysis mapping the cross-national institutional diversity in the evolution of pension systems in ten European countries. Analysing the long-term development, it describes the way in which institutional arrangements in private pensions evolved over time and interact with public pension reforms. The process of institutional change is examined by analysing critical junctures in the public–private pension mix. First, the early legacy and path-dependent post-war dynamics in public pension development are sketched, contrasting Bismarckian social insurance and Beveridge basic pension traditions. The second juncture compares successful versus belated or even failed expansion of public pensions to secure living standards in old age, and its consequences for crowding out private pensions. Finally, the more recent pension reforms led towards a multipillar pension system, in some cases retrenchment of public pensions and privatization efforts are crowding in funded private pensions.

The key issues addressed in this chapter are how to manage the transition to pension reform in Europe so as to satisfy principles of intergenerational equality and intra‐generational justice, while also contributing to the further democratization of retirement among men and women that has already started. The main sections of the chapter are: Managing the transition; The economics of ageing; Redesigning the retirement contract.

The dramatic political and economic changes witnessed by Central and Eastern Europe (CEE) and the Former Soviet Union (FSU) since the late 1980s did not leave the area of old-age security unaffected. While the inherited pension systems were rather uniform, the past seventeen years have brought diversity to the region's retirement schemes. Most transition countries have opted for parametric reforms, thus changing key characteristics of their pre-existing pay-as-you-go schemes. A number of countries in the region have embarked on partial or full pension privatization, thereby following the much advertised Latin American role models. Moreover, some countries have introduced national defined-contribution plans, similar to the schemes of Sweden and Italy. Overall, contributory approaches to old-age security — whether publicly or privately organized — dominate the post-socialist pension reform agenda. This chapter outlines the pre-1989 legacy in old-age security and the impact of transformation on the existing retirement schemes. It reviews pension reforms in CEE and the FSU and evaluates the state of pension reform in the post-socialist world.

Under the traditional approach to defined benefit plans, well-intended disciplinary and regulatory regimes have sought to restrict discretion, reduce uncertainty and risk, and protect workers and employers. Nevertheless, the discouraging state of defined benefit plans indicates that past efforts have gone awry. This chapter suggests that a new approach to defined benefit plans could resurrect the key elements required for retirement income security, rather than pursuing piecemeal reform.

In 2002, the British government announced the establishment of a Pensions Commission to assess the state of the country's pension system. In its first report, the Commission confirmed that the nation's pension system is in deep crisis. How come some offer better pension security than that in Britain? How do they cope with similar pressures? In its proposals for extensive reform, the Pensions Commission hopes to plug the holes in the current state system for those (mainly women) with interrupted careers and caring responsibilities. The Commission has three proposals: raising the state pension age to 67, or perhaps 69, by 2050; the creation of a more generous basic state pension by allowing the earnings-related second state pension to evolve into a flat-rate top-up to the present scheme; and the automatic enrolment of all workers into a National Pensions Savings Scheme. This introduction also looks at pension reforms abroad in areas such as Europe, including Germany and Sweden.

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.

A topic of long-standing discussion in Japan has been how to equitably merge the retirement plans for civil servants and private employees, which in the past have been managed separately. Recent legislation sought to unify social security pension schemes for all employees by extending the coverage of the Japanese Employees’ Pension Insurance Scheme, which covers private employees, to include civil servants as well. The author describes how Japanese social security pension schemes have evolved, the forces driving the merger of these plans, and what future prospects may be.

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 pension systems of Italy, Spain, Portugal, and Greece are organized according to the Bismarckian blueprint: ‘corporatist’ schemes of compulsory insurance covering different occupational groups, with different regulations. Historically, Italy pioneered developments by introducing compulsory pension insurance in 1919. Portugal and Greece followed suit in the mid-1930s, while in Spain fully fledged compulsory pension insurance arrived in 1947. Between the 1950s and 1980s, the pension systems in Southern Europe were significantly expanded in terms of coverage and improved in terms of benefits. This chapter discusses the trajectory of pension reform in Italy, the largest country in Southern Europe. It describes the main pension reforms of the first pillar; the efforts for promoting the development of a second, funded pillar; and recent developments under the administration of Silvio Berlusconi. The chapter also examines the gradual transformation of the ‘end-of-contract-payment’ (TFR) scheme.

The introductory chapter discusses the need for studying the changing public–private pension mix and the governance and regulation of private (occupational and personal) pensions. Public pension systems with pay-as-you-go financing have not only come under pressure due to demographic and socio-economic changes but also the recent financial crisis has challenged funded private pensions. Mapping the main features of the public–private pension mix of the selected ten European countries, the chapter gives an overview of the content of the country chapters, drawing some lessons from their varied experiences. The introduction also sketches the main topics of the three comparative studies on the changing public–private pension mix, the varieties of pension governance and regulation as well as the poverty and inequality patterns emerging from the different pension systems.

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.