Public or Private Pensions? Pensions and Pension Politics in the Nordic Countries

The pension structures of the Nordic countries are often described as statist structures. Generous public pensions are supposedly crowding out private pension alternatives (including occupational pensions). It is argued that these systems unite the pension-political interests of workers and marginal groups resulting in stable "pension regimes". This paper questions these statements. It argues that old political tensions are "built into" the institutional designs of the Nordic pension systems. There is a general tendency away from flat-rate "universal" pension arrangements toward dual systems in which the working population receives earnings-related pensions and the non-working (marginal groups) receive means-tested benefits. This development fits in with Gordons (1988) hypothesis that a convergence process is taking place in industrialized countries toward "two-tier" systems. High tax levels, gloomy demographic forecasts and increased competition at the world market have led the Nordic countries to consider cutbacks in their public pension systems. Tax subsidies to occupational and individual pension plans have also been cut back, partly to increase government revenue and partly to create increased competition in the markets for different types of financial assets. Recent changes in regulation policies also aims at creating increased competition in the private pension sector. If this trend prevails, a larger and more diversified private pension sector is likely to emerge in the Nordic countries in the future.