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The New Pension Mix in Europe

Recent Reforms, Their Distributional Effects and Political Dynamics

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Edited By David Natali

This book – based on a research project carried out by the Observatoire Social Européen asbl, with the financial support of the European Trade Union Institute (ETUI) – looks at the most recent developments in pension policy and politics in Europe and advances our understanding of the field in three respects: firstly, it contributes to improve our knowledge of the most recent reform wave passed in the wake of the recent economic and financial crisis; secondly, it assesses the long-term financial and social sustainability of pensions; thirdly, it analyses the politics of pensions and the way policymakers and stakeholders interact in order to address the major challenges to pensions.

The evidence proposed by six country chapters (about Italy, France, Finland, Poland, the Netherlands and UK) and three more transversal chapters (about the role of the EU, that of trade unions in pension reforms, and the main challenges to pension systems in Europe) proves that pension systems have been altered in the wake of the recent crisis. The more evident changes have consisted of: the halt – at least in some countries – of the spread of private pension funds; the improvement in the financial viability of the systems paralleled by more evident risks for the future adequacy of pension benefits; and the alteration of pension politics with the risk of the progressive marginalisation of the trade union movement. In many countries, reforms have been passed without any major social concertation, while the European Union (EU) has had a more evident influence, especially in the countries hit most by the crisis. As a consequence of these trends, we see the emergence of a "new" pension mix in Europe, with new institutional settings, and new challenges.

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Reforming Pensions in Finland. Multi-pillar Stability in the Context of Changes within the First Pillar (Mikko Kautto)

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Reforming Pensions in Finland

Multi-pillar Stability in the Context of Changes within the First Pillar

Mikko Kautto

Introduction

While shifts from redistribution to saving, from defined benefits to defined contributions, from pay-as-you-go to funding, and from social insurance towards saving products and multi-pillarization have been seen as global trends in pension policy during the past two decades (see e.g. WB, 1994; Holzmann and Hinz, 2005; Palier and Martin, 2008; James, 2014), such shifts are not a natural law, and are not happening everywhere (see e.g. Hinrichs, 2009). Compared to some path-changing developments elsewhere, the evolution of the Finnish pension system is an example of considerable path-dependence (see Myles and Pierson, 2000; Kangas et al., 2010), where first pillar pension schemes (see Ebbinghaus, 2011) still form the major element of pension security.

This chapter demonstrates how pension reforms in Finland have, first and foremost, happened within the first pillar. The chapter shows that reforming and modernizing first pillar pension security is possible, and how improvement in sustainability within the social insurance paradigm does not necessarily involve a growing role for second and third pillar schemes.

The main reason for these conclusions is the institutional design and encompassing role of the earnings-related employment pension scheme. First, the earnings-related pension scheme has large coverage: all work is insured in the employment pension scheme. Second, the Finnish employment pension scheme is uniform: all income earners – notwithstanding their contracts,...

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