In the results for the Riester reform, the positions of the employers and the insurance industry are not far apart, though unlike with the retirement age, the labour/capital split is less obvious, due to the varied positions of the trade unions. Some of these distances on the trade union side, such as the IG BCE being more in favour of the Riester reform and rating it as more successful, are in line with expectations from the literature (Wiß 2011: 153), while results like the GEW’s are more surprising.
It becomes very clear that even those actors advocating more private provision wish for the state pension to remain the basic pillar of pension provision. But how basic that basic pillar should be varies between the organisations; the idea of a basic floor (a minimum pension) seems unappealing.
For a discussion of the Riester reform, of course the incentives in particular for low-income earners should not be disregarded. The policy as constructed incentivises the take-up of a Riester pension, in particular for low-income earners, and as the DGB representative argues, this was a factor in gaining trade union support for the reform. On the other hand, the ten years since the introduction of the Riester pension have shown that take-up is not actually high enough among particularly low-income earners to make up for the drop in state pension level (Meyer 2013: 21; Hagen and Kleinlein 2011: 3f).
The idea of making Riester pensions, or a similar private pension, obligatory in response to low take-up rates is rejected strongly by all but two of the organisations in the sample; the two interviewees who do not dismiss it out of hand (one trade union, one social association)
would be cautiously open to “thought experiments” and treat the idea as a hypothetical, not a concrete political aim.
Among the trade unions, criticism at the time of the interviews is occasionally stronger than it was at the time of the reform. But it is especially noticeable that the social associations have a much stronger opposition to the Riester reform than the trade unions, even though several of the trade unions more strongly favour “more state pension” on the question of how a pension system should be set up in general (see above, 6.4). It is clear in the interviews that concern over future pensioner poverty is highly relevant to the trade unions and the social associations (see 2.3.2 and 2.6.1), some of which in response call for a reform of the reform of the replacement rate. Systemically, this would mean a strengthening or restoration of the functional logic of the Bismarckian pension system.
Another issue that is raised not only on the side of the opponents is the problem of complexity. An informed choice on Riester pensions is not really possible for a person with a “normal” degree of financial literacy (DGB, aba interviews). The issue of complexity is very familiar from the British discourse, where a plurality of actors argue that the complexity of the British pension system is putting people off engaging with pensions, and putting them off saving.
From the point of view of most British interviewees, the original problem of the British pension system on the lower income end has not necessarily been solved by auto-enrolment. The balancing act between providing a safety net for people who did undersave for whatever reason and not discouraging saving is a thorny question in many welfare states and has, for instance, increasingly become a focus in Germany as well. It has been a specifically sore issue in the British welfare context, though, because of the British state pension being below the poverty threshold, and means-tested additional benefits accordingly playing a big role for poorer pensioners. Most interviewees were very conscious of this problem. Among providers and employers, the reform of the basic state pension proposed in the 2011 Green Paper was generally seen to address this problem, while the unions and the pensioner associations were more sceptical.
Preliminary findings on opt-out rates of the first year and a half of staged auto-enrolment were released by the Department for Work and Pensions in April 2014, and for the big employers, the opt-out rates were low: between 9 and 10% of newly enrolled employees chose to opt out (DWP 2014b). There is some concern that this rate will not be maintained: the first employers becoming subject to the auto-enrolment legislation were all large enterprises (2% of employers responsible for 26% percent of all employees in the private sector) and the report also found that a majority of these employers chose to enrol employees into an existing pension scheme, which generally indicates a pension scheme above the (employer) contribution levels of NEST. But figures for 2015 still supported the low opt-out rates: by August 2015, the opt-out rate was still at 10% (DWP 2015b: 3). Whether figures will be so successful for small and smallest employers, where the incentives to opt out discussed above apply far more, remains to be seen.
In general, while some organisations clearly had reservations about aspects of the reform, the concept as such is supported by a very broad coalition. As can be seen from the discussion above, even those reservations are by and large due to concern over whether the legislation will be successful enough. Especially the support of employers (in this sample) is quite remarkable, when they are the ones having constraints and financial demands imposed on them. On the other hand, they were able to effect adjustments, such as a raising of the auto-enrolment thresholds, that are likely to make the reform more palatable to them. This is also where the results for the “three pillars” question (6.4) are further illuminating. The broad coalition that supported auto-enrolment is also reflected the across-the-board perception that the British pension system needs more state pension provision and more occupational pension provision (as well as more private provision).
In this context, the more interesting finding is perhaps who would take the principle of the reform further.
At the time of the original legislation, compulsion – i.e. auto-enrolment without the opt-out – was discussed and favoured by some, but was not part of the compromise suggestion then developed by the Pensions Commission. The expert view of the NEST representative provides a good insight into the positions of the players at the time as well as the role of political culture:
The trade unions would have preferred compulsion. I suspect the industry might have preferred compulsion because it is probably simpler. It was the Pensions Commission actually who decided to recommend automatic enrolment rather than compulsion to the Government. I think the arguments are that compulsion resonates quite badly with people because it feels a bit like a tax, ‘I’ve got no choice,’ whereas actually choice felt politically and culturally quite important. The other problem with compulsion is the possible problem of over-saving, for example where people who already have other means of making provision for their retirement, it could be that actually saving in a pension isn’t necessarily the right thing for those individuals to do.
NEST
With fears of high opt-out rates and concern over the efficacy of the scheme as such, the question of compulsion was also discussed in the interviews conducted for this study. The positions were very mixed. Against compulsion where the CBI, Unite and USDAW, while ABI and NEST were neutral. In favour were the TUC, the GMB, and with reservations the IoD. So both the trade unions and the employers seem split on the issue, should it arise. In the CBI interview, the issue of the new pension provision functioning like a tax is considered a deciding factor against compulsion (“If you make it compulsory it’s a tax.”), as well as leaving the final say to the individual. But there is also the theme of whether it is fair to force people into a scheme they might not ultimately benefit from.
The answer on the question of compulsion are a particularly interesting point given that auto-enrolment turned out probably the most consensual reform in the sample, just a few years after the passing of the legislation and right at the brink of its implementation. While on the one hand, the relatively low opt-out rates so far mean that auto-enrolment as such is
working without the need for further compulsion, on the other hand, as the actors (and the public) get used to the concept and see it bear fruit, there might be room for further (consensual) strengthening of occupational pensions, perhaps in the shape of higher contribution rates but also perhaps in “hard” compulsion becoming more palatable as the sceptical stakeholders adjusts to the soft version of it.