Yves Stevens: Beware of smuggling in pension reforms
Pension policy is often expected to solve problems that originate elsewhere in society or the economy. In his keynote address at the ETK-INPeR research seminar, Yves Stevens described this as “smuggling”.
When policymakers discuss pension reform, the stated objective is not always the only objective.
According to Yves Stevens, Professor at the University of Leuven, pension policy can become a tool for addressing labour market or financial market problems that are not, strictly speaking, pension problems. “Beware of smuggling”, Stevens summed up the concern with a touch of humour at the ETK-INPeR research seminar.
The distinction matters because using pension policy to pursue another purpose may change both the design and the identity of the pension system.
Such objectives may be legitimate, Stevens argued, but they should be communicated openly.
Pension systems must adapt without trying to fix everything
Joanna Rutecka-Góra, Associate Professor at the Warsaw School of Economics, distinguished between adapting pension systems to social and economic change and using them to solve problems in other fields.
According to Rutecka-Góra, pensions must respond to changing career paths and forms of employment, especially where younger people feel that existing systems do not meet their needs.
At the same time, she warned against changing pension systems simply to make labour markets, economies or other institutions work better. That can blur whether a reform is intended to secure retirement income or to achieve objectives elsewhere.
Framing is always part of pension policy
Mikko Kautto, Managing Director at the Finnish Centre for Pensions, approached the idea of smuggling from the perspective of policy framing. He asked whether some degree of smuggling might always be present because pension policy must inevitably be framed in one way or another.
Drawing on the history of the Finnish pension system, Kautto said such framing occurs repeatedly, although its emphasis changes over time.
In the current Finnish debate, he noted, the discussion increasingly concerns whether pensions should be understood as collective insurance or as a system based more on individual responsibility and agency.
What do we mean by a pension?
Suzy Morrissey, Deputy Director of the Pensions Policy Institute, turned the discussion at the ETK-INPeR research seminar to language: what is a pension?
The question is particularly relevant in the United Kingdom, where the shift from defined-benefit arrangements to defined-contribution savings occurred without many people recognising what had changed. The shift transferred considerable risk from employers to individuals.
Morrissey argued that defined-contribution arrangements create a savings pot, not in themselves a pension that provides an income throughout retirement. On this view, a long-term savings vehicle should not automatically be described as a pension.
This wordplay points to a substantive policy issue. The terms used in pension debates shape what people expect from a system. If fundamentally different arrangements are all called pensions, individuals may assume that they provide the same protections, even when the allocation of risk and the nature of the benefit differ considerably.
Precise communication is essential to transparent pension policy
Taken together, the ETK-INPeR research seminar highlighted two closely connected concerns.
Policymakers need to be clear about what pension reform is intended to achieve, and the public needs clarity about what is being called a pension. Precise language is essential to transparent pension policy.
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