Organising Private Social Protection - How to Explain Different Experiences with Collective Risk-Sharing in Denmark and the Netherlands?

As several governments are under growing pressure to contain or diminish public pension promises, many fear that pension privatisation will result in risk individualisation. However, countries such as Denmark and the Netherlands show that social protection is also possible within non-state provision. Despite similar organisation through collective occupational schemes, the political economy of pensions played out very differently over the past two decades - both in terms of conflicts and crisis performance. A most-similar research design is used to investigate the factors important for creating and shaping private social protection. The paper argues that we can explain diverging experiences by taking into account a) the distributional conflicts within collective risk-sharing, and b) the crucial role of governance rules in overcoming these conflicts. I develop a conceptual framework that distinguishes between the ‘pension promise’ (how the outcome is specified) and the ‘pension contract’ (how the outcome should be achieved). Both dimensions can be organised either more strictly (with pre-set and transparent rules), or more flexible (leaving room for discretion). Dutch schemes arguably made explicit pension promises, but left distributional decisions to the discretion of governing boards. This created incentives to pocket investment surpluses, left them badly prepared for the crisis and sparked distributional conflicts. Danish schemes made few pension promises but had clear rules on how to deal with surpluses and deficits; preventing a similar scenario. The conclusions discuss how this conceptual framework can help to explain the difficulties of organising private pensions in other mature welfare states.