Insuring individuals … and politicians: financial services providers, stock market risk and the politics of private pension guarantees in Germany

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Series Details Volume 26, Number 4, Pages 579-598
Publication Date April 2019
ISSN 1466-4429 (online)
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Studies of the rise of private defined-contribution pensions traditionally focus on social policy concerns about the allocation of risks and costs for beneficiaries and employers. There is, however, another – low-salience, financial – dimension of pension privatisation. Regulations introducing minimum return guarantees in private pensions impact financial markets because they incentivise fund managers to invest plan portfolios in fixed-income securities rather than in equities.

While different segments of the financial industry have divergent preferences over such guarantees, policy-makers are caught in a dilemma: Should they prioritise predictable benefit levels or equity market development? Using the case of the introduction of Germany’s ‘Riester-Rente’, we argue that, as politicians linked the introduction of private defined-contribution plans with cuts in statutory pensions, the re-emergence of a high-salience, social policy image of pensions helped insurance firms’ and some trade unionists’ case for minimum guarantees to prevail, thereby hindering equity market development in Germany.

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This article is part of a Special Issue of this Journal on 'The political economy of pension financialisation: public policy responses to the crisis'.

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