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Sustaining the unsustainable? The political sustainability of pensions in Finland and the Netherlands

What makes a pension scheme sustainable? Most answers to this question have revolved around expert assessments of pension schemes’ affordability or adequacy. This study shifts focus from the financial or social sustainability of pension scheme designs to their political sustainability. The key question in this research is: do policymakers have the willingness and the ability to sustain the pension scheme?

Ville-Pekka Sorsa & Natascha van der Zwan
16 November 2021
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In this research, Sorsa and Van der Zwan seek to fill a key research gap concerning the political sustainability of pensions by highlighting the processes of parametric adjustment through which pension schemes are sustained. Political sustainability refers to policymakers’ ability and willingness to sustain pension schemes in the face of perceived challenges. The authors show how capital, labour and state actors have been able to actively sustain collective defined benefit (DB) pension schemes in two coordinated market economies, Finland and the Netherlands. The two countries have managed to sustain their DB pensions for relatively long periods of time despite facing the same sustainability challenges that have motivated paradigmatic shifts in other pension systems. Sorsa and Van der Zwan find that sustaining has been successful thanks to a governance culture in which policymakers have been willing to keep all pension scheme parameters open for negotiation and an institutional context that made policymakers able to turn parametric pension reforms into power resources for further reforms. Their findings also explain recent changes in the Netherlands, which moved the Dutch system towards collective defined contribution pensions.

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