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Rethinking the Welfare State

The Political Economy of Pension Reform

Edited by Martin Rein and Winfried Schmähl

In this book a distinguished group of contributors discuss the changing political economy of pension reform. They focus on those countries which have launched a significant reframing of their pension system. Each chapter provides a detailed review of recent pension reforms and offers institutional evidence of the extent to which these reforms suggest a redirection of the welfare state towards a more public-private mix of policies. The countries were selected to represent the variety of new directions which mature industrial countries as well as countries in transition have taken.
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Chapter 9: How Societies Mix Public and Private Spheres in their Pension Systems

Martin Rein and John Turner


Martin Rein and John Turner Most countries with occupational pension systems have developed policies designed to increase the percentage of workers taking part in the systems. Countries with well-developed pension systems have a considerable variety of pension policies to do this. While some countries rely on voluntary provision by employers with tax incentives for motivation, other countries have mandated that employers provide occupational pensions, and still other countries have widespread pension coverage through collective bargaining because of the pervasive role of labour unions in their economies. In some countries, pensions are provided in addition to social security, while in a few countries pensions can be an alternative to social security. In some countries, pensions are primarily provided by employers, while in others pensions are primarily offered in the form of individual accounts provided through financial institutions, with the employer only providing payroll withholding. In this chapter, we categorize and analyse the pension policies around the world in countries with well-developed pension systems. We consider both employer-provided pension plans and individual account plans. PATHWAYS AND PLANS We categorize the wide variety of policies around the world as four pathways to increase pension coverage. Those pathways are voluntary provision with tax incentives, contracted out, widespread labour contracts, and mandatory (see Table 9.1). These pathways range from unrestrained choice, to a choice between a government provided pension and a private sector pension, to mandatory provision determined by collective bargaining between employers and trade unions, to a government-imposed mandate. The latter could mean...

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