During the 1990s, pension funds seemed to dominate the world's capital markets, reaping unprecedented rates of return. This stands in glaring contrast to the budgetary difficulties of most nonfunded European pension arrangements, which are a result of the changing demographic composition of the population. As a result, a growing number of European states is trying to transform the existing pay-as-you-go systems into funded pension arrangements. After a critical examination of these demographic projections, the claim that funded pension systems are not subject to ‘demographic stress’ is critically assessed. Finally, given the logic to which funded pension arrangements are subject, it is argued that the introduction of such institutions could result in a growing financialisation of the economy. It is claimed here that this is not without dangers for the long-term wealth-generating capacity of firms. So, not only are the reasons for pension restructuring less compelling than is generally thought, restructuring could also result in unwanted side-effects.
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