The Political Sustainability of the NDC Pension Model: The Cases of Sweden and Italy

Abstract

Since the early 1990s we have seen pension reforms in a large number of advanced welfare states, and the most impressive reforms have happened in countries with Bismarckian pension systems. Some of these countries have adopted a particularly innovative pension model which is based on pay-as-you-go financing and benefits that are a function of lifetime contributions. The approach is known as the notional defined contribution (NDC) model. This article examines what has happened to the public pension systems in Sweden and Italy after they were among the first to adopt the NDC model in the mid-1990s. By focusing on the degree of political consensus and conflict in the national pension policy debate since the NDC formula was introduced, the article offers an empirical assessment of the degree of political sustainability enjoyed by these landmark reforms. The paper shows that reform processes do not end with legislation. For reforms to have a lasting impact, whether they are left to work as intended also matters. The ‘post-adoption’ policy trajectory depends on a number of factors related to policy design, economic context and political ownership.