Varieties of Risk Shifts: Divergent Regulatory Politics of Personal Pensions in Germany and Sweden

As governments in affluent democracies have promoted the expansion of private fully funded defined-contribution pension plans in recent decades, pension privatization is widely considered to have made pensions much more dependent on the performance – and volatility – of financial markets. Yet some countries have introduced regulations that force private pension providers to guarantee a minimum rate of return on individuals’ pension assets. This has been the case of Germany, which introduced such a guarantee for the Riester products when these were created in 2001 by the left-wing Schroeder government. By contrast, when a Social Democratic cabinet introduced the “premium pension” in Sweden in 1998 (a decision based on the 1994 reform adopted by a center-right government with Social Democratic support), it did not create any such safeguard. Why have left-wing governments in these two coordinated market economies decided to go for such different regulatory arrangements? By using process tracing to evaluate a range of potential explanatory factors (policy feedback from pre-existing regulatory arrangements in the insurance and mutual fund industries; direct lobbying by different segments of the financial service industry), this paper’s aim is to build a theory that will shed light on the political drivers of this crucial aspect of pension plan regulation.