The Decline of a Welfare Market. State-Subsidized Private Pensions in Germany

Since the mid-1990s, the transformation towards a three-pillar system has been the most important development in pension policies. In Germany, the political establishment of a three-pillar model was closely linked to the introduction of a state-subsidized private pension scheme in 2001, which was named "Riester pension". and a new ‘welfare market was constituted. After several years of growth, the market has passed into a continuing process of decline and stagnation. This development is pretty surprising and contradicts the expectations about a worldwide establishment of three-pillar systems. This paper will give indications how to measure ‘decline of a welfare market’ (1). Subsequently, the paper will try to explain rise and fall of the German welfare market for Riester pensions (2). It is also remarkable that no policy change has taken place, although the expected growth of the market for private pension provision have failed to materialize. It is therefore essential to explain why the political actors adhere to the Riester legislation (3). A specific causal mechanism, the self-enforcing power of policy discourses, stands in the center of the presented explanatory approach. Policy discourse is defined as the entirety of all public statements on a specific policy including evaluations of the policy as a whole, of individual reforms or specific policy instruments and levels of provision. The paper includes the analysis of the policy discourse on Riester pensions from 2002 to 2016. The initially promoted success story transformed in the establishment of a 'low return frame' and afterwards in a ‘failure frame'. The failure frame became more and more intensive and deployed the strength to create political and economical effects, it develops a self-inforcing power to decrease the public image of Riester pension products and to undermine further attempts to privatization.