Introduction: Studying Pension Privatization in Europe

Abstract

The increased privatization of pensions – the shift from state to private responsibility for old age retirement income – raises fundamental issues of participatory stakeholder rights and social inequality. International organizations and national policymakers advocate for a policy shift away from pay-as-you-go (PAYG) financed public pension schemes towards private, mainly prefunded, pensions. This is largely motivated by an economic logic of financial sustainability in ageing societies under fiscal austerity and of boosting financial capital markets to create economic growth. Pension reforms over the last two decades cut back public pension benefits, gradually extended the official retirement age, and fostered privately funded pensions. While the sustainability endeavour was driving much of these pension reforms, the adequacy of retirement income has often been neglected from current public debates, partly because poverty in old age seems no longer to be such a pressing concern in Europe’s advanced welfare states. Yet poverty and income inequality vary across pension systems in Europe; they are also on the rise due to the continued retreat of public pensions and the larger reliance on voluntary prefunded private pensions. The recent financial market crises during the 2000s reveal the problematic nature of funded pensions that fall short of expected returns. These developments pose major questions with respect to the increasing role of private pensions: Does the retreat from public responsibility lead to more private initiative that fills the gap in future old age income provision? How are these private pensions that are invested for the benefit of future pensioners governed and regulated? To what extent are the risks of old age income security shifted onto individuals, and will income inequality grow larger? Although some countries have a long tradition in pension fund capitalism, others have only recently decided to change from dominantly public to multipillar pension schemes. ‘Private’ pensions are not the same everywhere across