Since the mid-1970s, governments in all OECD countries have promoted the rise of pre-funded defined-contribution pensions. This is a very significant phenomenon that has often been seen as resulting in a “great risk shift” in social protection and in the “financialization” of the economy and of individuals’ everyday lives. Political scientists have provided conflicting explanations for the rise of such plans. A first strand of literature has seen right-wing parties’ pro-market agendas as the main driver (Hacker 2004; 2006). A second strand has emphasized growing convergence between right-wing parties and left-wing parties because of attempts by the latter to address the needs of their new middle-class constituencies (Hausermann 2010). Finally, a third strand has focused on the role of international organizations in diffusing blueprints for pension privatization (Orenstein 2008; 2013). These explanations have been conflicting largely because none of them have taken into account crucial differences in the types of defined-contribution plans (cf. personal vs. occupational plans) that have been promoted and in the legal instruments (cf. tax incentives for voluntary expansion of coverage vs. legislation making coverage mandatory or quasi-mandatory) through which they have been promoted.
By intersecting these two dimensions (type of plans and legal instrument for their promotion), I identify four typical reform outcomes (which have different implications for the reallocation of risks and for the extent of “financialization”) and argue that each of them has been associated with specific political and institutional configurations. Almost all OECD countries have introduced tax incentives for voluntary personal pensions, but such plans have been almost universally introduced by right-wing parties in alliance with segments of the financial services industry (e.g. mutual funds) previously uninvolved in the pensions business. A few countries also considered introducing mandatory personal pensions (UK under Thatcher, Germany under Schröder and the US under Bush), but only Sweden did so through a cross-party agreement in the mid-1990s. Tax incentives for the development of voluntary occupational schemes administered by the “social partners” have only been introduced in countries that already had a pre-existing tradition of social partnership, but have been promoted by right-wing parties in Nordic countries and left-wing parties in Continental Europe, in each case in partnership with the social partners. Finally, a more recent trend in reforms has been the introduction of regulations requiring the automatic enrolment (cf. quasi-mandatory coverage) of employees in occupational pension plans, but this type of reform has been systematically introduced by left-wing parties in Anglo-Saxon countries and, more recently, a populist government in Poland. In order to provide evidence for the mechanisms (both in terms of motivations and coalition-building) linking these different political configurations with different outcomes, I use process tracing of more than a dozen specific reforms introduced in seven countries (US, UK, France, Belgium, Germany, Sweden, Poland) from the 1970s until now.
