There is considerable interest in the design and funding of European pension systems. While many commentators emphasise the financial burden of underfunded European social security systems, less understood are the structure and performance of European supplementary pensions. We introduce readers to the Dutch system of funded supplementary pensions, focusing upon the governance structure of those pension funds in the context of European competition policy. From the early 1950s the Dutch government has encouraged the development of employer-sponsored and industry-wide supplementary pensions covering most employed Dutch workers. As the government has slowly discounted the real value of social security, supplementary pensions have come to play an increasingly important role in maintaining high levels of income replacement upon retirement. From the perspective of Anglo-American competition policy, these pension institutions appear unusual. In many instances, firms are required to participate in sector schemes, denying them the right to make separate arrangements with competing financial institutions. Moreover, many sector schemes are mutually owned financial conglomerates selling services to captive internal markets. Referencing the decision of the European Court of Justice in Maatschappij Drijvende Bokken BV we assess the arguments for and against this model of pension provision in the light of European competition policy and the geography of finance. While we are sympathetic to the goals of social solidarity, the underlying structure of governance combines the risks of moral hazard with limited transparency and accountability.
Get full access to this article
View all access options for this article.
References
1.
AaronH, 1999, “Social security: Tune it up, don't trade it in”, in Should the United States Privatize Social Security? Ed. FriedmanB (MIT Press, Cambridge, MA) pp 55–112.
2.
AmbachtsheerKEzraD, 1998Pension Fund Excellence: Creating Value for Stakeholders (John Wiley, New York).
3.
ArrowK J, 1984, “Insurance, risk, and resource allocation”, in Collected Economic Papers Volume 4: The Economics of Information (Harvard University Press, Cambridge, MA) pp 77–86.
4.
BennettP, 2000a, “Anti-trust? European competition law and mutual environmental insurance”Economic Geography forthcoming.
5.
BennettP, 2000b, “Mutuality at a distance? Risk and regulation in marine insurance clubs”Environment and Planning A32147–163.
6.
BentsonG J, 1990The Separation of Commercial and Investment Banking: The Glass–Steagall Act Revisited and Reconsidered (Oxford University Press, New York).
7.
BergerA NDemsetzR SStrahanP E, 1999, “The consolidation of the financial services industry: Causes, consequences, and implications for the future”Journal of Banking and Finance23135–194.
8.
BlomsmaMJansweijerR, 1997, “The Netherlands: Growing importance of private sector arrangements”, in Enterprise and the Welfare State Eds ReinMWadensjoE (Edward Elgar, Cheltenham, Glos) pp 220–265.
9.
BoldrinMDoladoJ JJimenoJ FPeracchiF, 1999, “The future of pensions in Europe”Economic Policy29289–321.
10.
Borsch-SupanA, 2000, “A model under siege: A Case study of the German retirement insurance system”Economic Journal110F24–F45.
11.
BrennanJ JDriscollD-MHaagaP GJohnsonM HLyonsW MMcDonoughG C, 1999Enhancing a Culture of Independence and Effectiveness: Report of the Advisory Group on Best Practices for Fund Directors (Investment Company Institute, Washington, DC).
12.
BuddACampbellN, 1998, “The roles of the public and private sectors in the UK pension system”, in Privatizing Social Security Ed. FeldsteinM (University of Chicago Press, Chicago, IL) pp 99–134.
13.
ClarkG L, 1998, “Stylised facts and close dialogue: Methodology in economic geography”Annals of the Association of American Geographers8854–78.
14.
ClarkG L, 2000Pension Fund Capitalism (Oxford University Press, Oxford).
15.
ClarkG L, 2001a, “Pension systems: A Comparative perspective”, in The International Encyclopedia of Business and Management: IEBM Handbook of Economics Ed. LazonickW (Thompson, London) forthcoming.
16.
ClarkG L, 2001b, “The vocabulary of European integration: Code words for the new millennium”Environment and Planning D: Society and Space forthcoming.
17.
ColemanJ S, 1990Foundations of Social Theory (Harvard University Press, Cambridge, MA).
18.
DavisE P, 1995Pension Funds: Retirement Income Security and Capital Markets. An International Perspective (Oxford University Press, Oxford).
19.
DavisE P, 1996, “International experience of pension fund reform and its applicability to The Netherlands”, WP11, Birkbeck College, University of London, London.
20.
de BurcaG, 2000, “Re-appraising subsidiarity's significance after Amsterdam”, in State of the European Union 5: Risks, Reform, Resistance and Revival Eds CowlesM GSmithM (Oxford University Press, Oxford) forthcoming.
21.
De RyckK, 1999Rebuilding Pensions: Security, Efficiency, Affordability (Pragma Consulting, Brussels).
22.
DisneyR, 2000, “Crises in public pension programmes in OECD: What are the reform options?”Economic Journal110F1–F23.
23.
EdeyMSimonJ, 1998, “Australia's retirement income system”, in Privatizing Social Security Ed. FeldsteinM (University of Chicago Press, Chicago, IL) pp 63–97.
24.
Esping-AndersonG, 1989The Three Worlds of Welfare Capitalism (Polity Press, Oxford).
25.
EvansA, 1998European Union Law (Hart Publishing, Oxford).
26.
FaullJNikpayA, 1999The EC Law of Competition (Oxford University Press, Oxford).
27.
GardinerK, 1999, “De-fusing the demographic bomb”, Special Economic Study, Morgan Stanley Dean Witter, 25 Cabot Square, Canary Wharf, London E14 4QA.
28.
GoffeeRJonesG, 1998The Character of a Corporation (HarperCollins, New York).
29.
GoodinRHeadeyBMuffelsRDrivenH-J, 1999The Real Worlds of Welfare Capitalism (Cambridge University Press, Cambridge).
30.
GruberJWiseD, 1999, “Introduction and summary”, in Social Security Programs around the World Ed. GruberJWiseD (University of Chicago Press, Chicago, IL) pp 1–35.
31.
HayD, 1993, “The assessment: Competition policy”Oxford Review of Economic Policy9(2) 1–26.
32.
HelmDJenkinsonT, 1997, “The assessment: Introducing competition into regulated industries”Oxford Review of Economic Policy13(1) 1–14.
33.
HelperS, 2000, “Economists and field research: ‘you can observe a lot just by watching’”American Economic Review90(2) 228–232.
34.
HoptK JHandaHRoeM JWymeerschEPriggeS (Eds), 1999Comparative Corporate Governance: The State of the Art and Emerging Research (Oxford University Press, Oxford).
35.
HuttonW, 1996The State We Are In (Jonathan Cape, London).
36.
JenkinsonTLjungqvistA, 1999, “The role of hostile stakes in German corporate governance”, WP 99-FE-02, Said Business School, University of Oxford, Oxford.
37.
JensenM, 1993, “The modern industrial revolution, exit, and the failure of internal control systems”Journal of Finance48831–880.
38.
LangbeinJ, 1997, “The secret life of a trust: The trust as an instrument of commerce”Yale Law Journal107165–189.
39.
LeibfritzWRoseveareDForeDWurzelE, 1995, “Ageing populations, pension systems and government budgets: How do they affect savings?”WP 156, Economics Department, OECD, Paris.
40.
MunnellA, 1999, “Comments”, in Should the United States Privatize Social Security? Ed. FriedmanB (MIT Press, Cambridge, MA) pp 133–146.
41.
NevenDPapandropoulasPSeabrightP, 1998Trawling for Minnows: European Competition Policy and Agreement Between Firms (Centre for Economic Policy Research, London).
OECD, 1999OECD in Figures: Statistics on Member Countries (OECD, Paris).
44.
OlsonM, 1965The Logic of Collective Action (Harvard University Press, Cambridge, MA).
45.
OrszagPStiglitzJ, 1999, “Rethinking pension reform: ten myths about social security”, mimeo, World Bank, Washington, DC.
46.
PlougNKvistJ, 1996Social Security in Europe: Development or Dismantlement? (Kluwer Law International, The Hague).
47.
PrattJZeckhauserR (Eds), 1986Principals and Agents (Harvard Business School Press, Boston, MA).
48.
PrinsF, 1999, “Introduction to the Dutch pension system”, Vereniging van Bedrijfspensioenfondesen, Business Park Zuidflank, Patrijsweg 30, 2289 EX Rijswijk.
49.
ReesR, 1993, “Tacit collusion”Oxford Review of Economic Policy9(2) 27–40.
50.
ReesRKessnerE, 1999, “Regulation and efficiency in European insurance markets”Economic Policy29365–399.
51.
RoeM J, 1994Strong Managers, Weak Owners: The Political Roots of American Corporate Finance (Princeton University Press, Princeton, NJ).
52.
SalminenK, 1993Pension Schemes in the Making: A Comparative Study of Scandinavian Countries (Central Pension Security Institute, Helsinki).
53.
SapirABuiguesPJacqueminA, 1993, “European competition policy in manufacturing and services: A Two-speed approach?”Oxford Review of Economic Policy9(2) 113–132.
54.
SchaubA, 1998, “Competition policy objectives”, in European Competition Law Annual 1997: Objectives of Competition Policy Ed. EhlermannC DLaudatiL L (Hart Publishing, Oxford) pp 119–128.
55.
ShawJ, 2000, “The paradox of the ‘European polity’”, in State of the European Union 5: Risks, Reform, Resistance and Revival Ed. CowlesM GSmithM (Oxford University Press, Oxford) forthcoming.
56.
StoneD, 1999, “Learning lessons and transferring policy across time, space and disciplines”Politics1951–59.
57.
SwaanA, 1998In Care of the State: Health Care, Education, and Welfare in Europe and the USA in the Modern Era (Polity Press, Oxford).
58.
Verzekeringskamer, 1999Financiele Gegevens PensioenfondsenVerzekeringskamer, PO Box 929, 7301 BD Apeldoorn.
59.
VickersJ, 1997, “Regulation, competition and the structure of prices”Oxford Review of Economic Policy13(1)15–26.
60.
ViscusiW KVernonJ MHarringtonJ E, 1995Economics of Regulation and Antitrust2nd editionMIT Press, Cambridge, MA).
61.
WallaceH, 2000, “Possible futures for the European Union”, Jean Monnet WP 7/00, Harvard Law School, Cambridge, MA.
62.
Watson Wyatt, 1998Executive Summary: The World's Major Savings MarketsWatson Wyatt, Watson House, London Road, Reigate, Surrey RH2 9PQ.
63.
World Bank, 1994Averting the Old Age Crisis (World Bank, Washington, DC).
