The impact of the new public and private pension settlements in Britain and Germany on citizens’ income in old age

Abstract

This chapter uses policy simulation to illustrate the scale and nature of the institutional changes made to the German and British pension systems by reforms undertaken in the first decade of the new century. The projected outcomes of the new systems for a range of hypothetical biographies in both countries are compared with those of the systems they replaced. The chapter argues that the results of these simulations are consistent neither with the predictions of the gloablisation thesis nor regime theory. There is no evidence of institutional convergence on the basis of a ‘race to the bottom’, but nor have the two systems remained constrained by regime logic. In fact, Britain’s reform is strongly social democratic in orientation, with Germany’s strongly liberal. In the short-term these developments might generate some convergence of pension levels as German citizens spend more of their working life under the new less generous state system while Britain’s gradually gain the benefits of recent reforms. However, when analysis focuses purely on the nature of current public/private pension institutions as revealed by their projected outcomes the German system is shown to be more consistent with an ideal typical liberal regime than Britain’s.