Economic Interests and the Construction of a European Single Pension Market

Abstract

This article asks why the EU member states were able to agree on an EU pension fund directive in 2003 whereas they had failed to do so in a previous attempt (1991). The main argument is that a single pension market was a desirable project before 2003, but bargaining inefficiencies prevented its realisation. This is because bargaining over integration in this sector requires credible signalling between Bismarckian and Beveridgean pension regimes. The co-ordination of divergent welfare and financial regimes depends on the ability of governments to send costly signals that only a limited range of outcomes are considered legitimate in their home state. In turn, the capacity to signal and the costs of bluffing hinge on international pressure for pension reform (Economic and Monetary Union) and the magnitude of changes governments have to make to their respective welfare finance arrangements.

The European Union and Multi-Level Contention over Welfare Marketization

“…Two directives on occupational pensions were adopted in the framework of the Single Market regulation. After a failed attempt to create a Single Pension market for pension funds as early as 1991 (Hennessy 2008), a directive on institutions for occupational retirement provision was adopted in 2003 which liberalized the activities of pension funds. e intention was twofold: strengthen the European market, and steer the development of a second pillar funded by workers and employers in addition to the rst, social security-based pillar (van Meerten 2019).…”

The cross-border portability of supplementary pensions: Lessons from the European Union

“…Despite these exemptions, the Portability Directive struck at the core of the Bismarckian occupational pension model. Long vesting and waiting periods are a fundamental human resources strategy enabling the smooth functioning of labour markets in coordinated market economies (Hennessy, 2008). As a result, it was impossible to reach the required unanimity of member states voting in the Council of the European Union.…”

“…The first failed attempts to regulate occupational retirement provision followed the Single European Act and continued during the build-up of the Economic and Monetary Union. An initial proposal made by the Commission in 1991 did not win unanimous support in the Council, mainly due to French and German opposition (Hennessy, 2008). In 1995, a new Directive on institutions for retirement provision had to be withdrawn under pressure from several member states.…”

“…The Directive balanced the interests of Bismarckian countries with Beveridgean ones that have liberal occupational pension systems such as the UK (Hennessy, 2008). The former were given a number of guarantees not to disrupt the internal financing and human resource functions that occupational pensions play in highly organized coordinated market economies (see Estevez-Abe et al, 2001), such as the exclusion from the scope of the Directive of book reserve plans, which are prominent in Germany and Austria, and PAYG schemes (e.g.…”