Mandating private pensions: experience in four European countries

This study examines the experience of four countries--the Netherlands, Sweden, Switzerland, and the United Kingdom--in which the mandating of private pensions exists or has been considered. Proposals to mandate private pensions in the United States have been introduced in Congress several times. The analysis of foreign thinking presented here provides a background on the reasoning behind such a policy and on the integration of private and public systems and the problems involved. A prime reason for mandating private pensions--instead of seeking higher social security benefits or additional social security layers--has been the pressure to avoid higher payroll taxes. Some countries already had such high contribution rates that they sought other means to improve benefits. Adding a layer of private pensions, it was thought, does not involve Government mechanisms and keeps the money in the private sector. Yet mandating by law creates many problems, and no country has fully implemented such legislation.