The Regulatory Policies of Private Pensions in the UK and Germany: Goals and Instruments of Regulation in a Welfare State Environment

Abstract

The interpretation of the (partial) privatization of social services in European welfare states since the 1990s is controversial. Social critics diagnose a ‘surrender of public responsibility’ (Gilbert, 2002) while reformers see privatization as a better way to achieve welfare ends — ‘welfare ends through market means’, as Taylor-Gooby described the rationale of New Labour policies in the UK (Chapter 3 in this book; see also Taylor-Gooby et al., 2004). Both sides have a point. The critics argue that institutions serving the public good are subjected to market principles and economic interests. Social rights and entitlements give way to opportunities (and risks) in the market, redistributive policies are curtailed in favour of enabling and activating policies, and individual responsibility replaces public responsibility. By contrast, reformers maintain that social ends are upheld; only the instruments use to exert responsibility change. Private providers are seen to meet welfare ends better than state agencies, by delivering welfare goods in a more efficient, cheaper, and more responsive way. In the 2001 pension reform in Germany, reformers indeed referred to welfare ends when introducing a subsidized private pension, the Riester-Rente, with the explicit aim of closing the income gap in old age brought about by reductions in public pensions.