Changing European welfare: The new distributional principles of pension policy

ARZA, CAMILA

Pension Reform in Europe: Politics, Policies and Outcomes

Routledge

Lugar: Londres; Año: 2008; p. 109 - 131

This article evaluates the distributional principles of pension policy, and shows how recent reforms have modified the stratification goals that have long characterised countries and pension schemes in well-defined clusters. It analyses four countries belonging to different ?worlds of welfare? as well as to different pension system models (Bismarckian/Beveridgean), which have gone through major reforms in the past two decades (Italy, Sweden, Poland and the UK). Countries which originally embraced different welfare goals and ideas have shifted towards similar distributional principles. It is thus not just pension institutions that exhibit path-breaking, but also (to a greater or lesser extent) the principles that underpin them. A shared feature across countries has been the individualisation of pension rights and benefits. This means that benefits now depend more closely on individual characteristics, in particular, individual labour market histories and income levels. While this has reduced the inequalities deriving from special regimes and sectoral privileges, it has also reduced risk-pooling in old age: most of the risks of old age financing have been transferred to the individual. Institutionally, this was done either by increasing the share of private defined-contribution schemes in pension policy, or by redesigned public provision under actuarial principles (via NDC models). The separation of poverty prevention and income replacement in two layers has also redefined the role of the state, which maintains a major role in poverty prevention (with non-contributory, means-tested benefits expanding in all countries) but leaves more room to the private sector in income replacement. Where the state remains important in income replacement, as in Sweden and Italy, a model of distribution which mimics the distributional logic of private pensions tends to be adopted ? providing individualised entitlements dependent on individual work histories, choices and risks.