Collective Investment and the Paradox of Choice: The Individualization of Occupational Pension Risk in Sweden, Denmark and the Netherlands

This paper focuses on the politics of individual investment choice in funded pension provision. The paper analyzes three countries where funded pensions play a substantial role in retirement provision: Sweden, Denmark and the Netherlands. These three countries differ dramatically in the extent to which their funded pension schemes allow individuals to decide how pension assets are invested. Sweden introduced mandatory individual investment accounts as part of its major public pension reform in 1998. Unions and employers followed suit by expanding individual investment choice in negotiated occupational pensions that cover 90% of the labor force. In Denmark, mandatory negotiated occupational schemes now offer participants a wide range of choices in terms of investment products. In contrast, individual investment choice plays only a small role in Dutch negotiated occupational pensions, although current reform debates emphasize expanding individual choice.

This paper analyses the political processes that account for this difference in outcomes. In both Sweden and Denmark, the introduction of individual pension choice is rooted in bitter conflicts about economic democracy. Employers in both countries responded to union efforts to socialize investment with campaigns of their own to prevent and/or limit union influence over investment; the introduction of individual investment choice within a collective DC structure was a crucial part of this strategy. In contrast, the stability of social partnership and absence of union radicalism in the Netherlands have generated very strong support for DB, fully funded negotiated pensions that offer very little individual investment choice.