Supplementary pensions between social policy and social regulation

The European Commission has developed an analysis of supplementary pensions which constructs the policy area as regulatory by separating ‘allocative’ issues, such as smoothing lifetime income and promoting saving, from traditional ‘redistributive’ or ‘budgetary’ welfare concerns, such as ensuring an adequate minimum income. In the allocative sphere, it promotes market-oriented values, notably ‘actuarial fairness’. However, the progress of European measures on supplementary pensions is impeded by alternative approaches. The social partners play a large role in regulating supplementary pensions, and they provide an approach to regulation which is antagonistic to the adoption of common EU rules. Member states might be expected to view EU-level regulatory activity more favourably as providing a lever for pension reforms, but several states which had already embarked on substantial changes to their pension systems did not welcome EU-led reforms. Introduction The boundary between regulating markets to maximise social welfare and taxing and spending to achieve distributional goals is an elusive construct. Nowhere is it harder to grasp than in pensions, where efficiency goals of providing security and insurance intertwine with interand intra-generational issues of distributional equity, and where provisions governed by market mechanisms are spliced onto public systems. Furthermore, many of the member states of the EU are engaged in pension reforms which will tend to change the balance of provision between their public schemes and supplementary pensions, so the boundary between social policy and social regulation is not only hazy, but shifting. What might be the role of the EU in these reform processes? On one hand, pension reforms are contentious and salient in domestic politics. Key decisions, surely, cannot be made in Brussels. On the other hand, supplementary pensions are market instruments, governed by market values. The EU offers a policy domain in which the logic of market-oriented regulatory reform dominates. Majone (1993) argued that the European Commission is not only able to formulate proposals to promote efficiency and growth that are acceptable to the member states; it is also particularly well-suited to this endeavour. It stands at one remove from the imperatives of majoritarian democracy, and is therefore able to formulate proposals under relative immunity from distributional pressures. This paper examines how the Commission has proceeded in the area of supplementary pensions regulation. The Commission has a clear remit to bring forward measures to facilitate the development of the internal market. The cross-border activities of