1. The politics of pension reform in western Europe Giuliano Bonoli

2. | ©IDHEAP – giuliano.bonoli@idheap.unil.ch || Diapositive 2 | Two worlds of pension policy in Europe Social insurance systems (France, Germany, Italy, Sweden) Multipillar systems (Denmark, Switzeralnd, Netherlands, UK)

3. | ©IDHEAP – giuliano.bonoli@idheap.unil.ch || Diapositive 3 | Social insurance systems Generous public pensions (ca. 70% of earings) Contributory, earnings related benefits Occupational fragmentation PAYG (pay-as-you-go) financing

4. | ©IDHEAP – giuliano.bonoli@idheap.unil.ch || Diapositive 4 | Multipillar systems Basic pension at subsistence level (20-40% of average earnings) Provision is insufficient for the middle classes Development of a second pillar In the 1960s-1970s, extension of second pillar coverage

5. | ©IDHEAP – giuliano.bonoli@idheap.unil.ch || Diapositive 5 |

6. | ©IDHEAP – giuliano.bonoli@idheap.unil.ch || Diapositive 6 | Different problems… Social insurance systems Long term financing Systèmes à plusieurs piliers Include atypical employment Regulate private pensions

7. | ©IDHEAP – giuliano.bonoli@idheap.unil.ch || Diapositive 7 |

8. | ©IDHEAP – giuliano.bonoli@idheap.unil.ch || Diapositive 8 | Reform in social insurance pension systems Path dependency Strong entrenched interests High mobilisation capacity of the defenders of the status quo

9. | ©IDHEAP – giuliano.bonoli@idheap.unil.ch || Diapositive 9 | What will social insurance pension systems in 2030-2040 look like? Germany: replacement rate of social insurance pensions = 46% Italy: replacement rate for new pensioners: 49% At the same time, funded provision is expected to expand substantially  How was it possible?

10. | ©IDHEAP – giuliano.bonoli@idheap.unil.ch || Diapositive 10 | Delay Delay: many of the reform successfully enacted were characterized by long phasing in periods Long phasing in period means that many of those who are entitled to vote, will not be affected by the reform Delay can be seen as a divisive strategy

11. | ©IDHEAP – giuliano.bonoli@idheap.unil.ch || Diapositive 11 | Year of reform, full implementation date and time lag in France, Germany and Italy Year of reformFull implementation Time lag France1993200411 France2003202017 Germany1989201223 Germany19992025 ca.26 ca. Germany2006202924 Italy1992203240 Italy1995203540

12. | ©IDHEAP – giuliano.bonoli@idheap.unil.ch || Diapositive 12 | Proportion of the voting age population affected by reform, depending on phasing in period, 2001 Length of phasing in/country FranceGermanyItaly 10 years58%74%55% 20 years40%47%38% 30 years21%27%19% 40 years4%10%3%

13. | ©IDHEAP – giuliano.bonoli@idheap.unil.ch || Diapositive 13 | Sequencing Stage 1: Adjustment through contribution increases or government transfers (which contribute to government deficits) Stage 2 : Moderate retrenchment. Concern for the long term financing of pension pushes the middle classes towards private alternatives Stage 3: More radical retrenchment Stage 4: Development of generalised second pillar provision

14. | ©IDHEAP – giuliano.bonoli@idheap.unil.ch || Diapositive 14 | Pension optimists among working age individuals (percentage answering the items underlined) Year (survey)QuestionFranceGermany (west) Italy 1992 (EB37.1)Do you think that the pensions you will receive when you retire will be… Completely adequate/Just about adequate/Somewhat inadequate/Very inadequate 44.570.652.7 1999 (EB 51.1)In the future there will be more elderly than there are now. Do you think that people will get less pension for their contributions? Yes/No/Don’t know 11.524.424.9 2001 (EB 56.1)Do you think that the state pension you will receive when you retire will allow you to get by…With great difficulty/with difficulty/easily/very easily 24.423.313.8

15. | ©IDHEAP – giuliano.bonoli@idheap.unil.ch || Diapositive 15 | Financial liabilities of life insurance companies, in million EUR (assets for D and CH)

16. | ©IDHEAP – giuliano.bonoli@idheap.unil.ch || Diapositive 16 | Conclusion Slow convergence towards the multipillar model Multipillar may become the new norm, but be adopted with some degree of national variation Sequencing: shifting opportunity structures – never say never