What follows is a sketch of three of the main claims of How to Pool Risks across Generations: The Case for Collective Pensions (Otsuka 2023) with which my symposium commentators critically engage: namely, that (1) by efficiently pooling risks across as well as within generations, (2) collective pensions can realize a form of Rawlsian reciprocity involving fair terms of cooperation for mutual advantage, (3) through the voluntary binding agreements of individuals to join a mutual association that provides social insurance. I respond to their challenges to these claims in my replies that follow their contributions.

A response to pressures on pension finance caused by population ageing and economic turbulence has been a substantial move from traditional defined-benefit plans in which, at least in principle, all risk falls on the contributions side, to defined-contribution plans in which risk during accumulation all falls on the benefits side. This paper argues that both designs are ‘corner solutions’ and hence generally suboptimal, and goes on to set out a range of designs that offer different ways of sharing risk among workers, employers, future pensioners and current pensioners.

This contribution discusses the central thesis in Michael Otsuka’s book that collective pensions can be organized on a voluntary basis from the recent experience with pension reform in the Netherlands. Despite a long tradition of collective-funded pensions organized in a decentralized way by social partners, basis reform was necessary as population ageing made it increasingly harder to maintain the intergenerational solidarity implicit in these pensions. Although it is well-established that risk sharing between generations can be beneficial and welfare improving to all, it is far from certain that new generations will enter existing pension arrangements on a voluntary basis. First, there is a considerable ‘discontinuity risk’ if deficits in pension funding – caused by bad shocks – deter younger generations from entering the scheme. Second, even if it is to their own interest most people do not voluntarily engage in pension schemes due to several kinds of behavioural and psychological barriers.

This paper is a contribution to a symposium on Michael Otsuka’s book, How to Pool Risk Across Generations. Following Otsuka, one may distinguish three distinct systems of cooperation within a standard pension arrangement: the retirement system, the longevity risk pool and the investment risk pool. It is important to observe, however, that only the retirement system constitutes a genuine system of intergenerational cooperation, the other two are essentially intragenerational, in that they pool risks among members of a cohort. Otsuka is faulted for being occasionally less than clear on these distinctions.

Michael Otsuka argues that collective pension schemes are forms of social cooperation on equal terms for mutual advantage and thus, matters of social justice. In this way Otsuka wants to understand collectively funded pensions in Rawlsian terms. I argue that not all forms of social cooperation are the same and that the specific kind of social cooperation Rawls has in mind is, in at least three central respects, different from the kind of social cooperation involved in the collective pension schemes Otsuka describes.

I agree that a good pensions system should embody some form of collective risk pooling and that this would be to the advantage of everyone. There are some difficult issues of adverse selection to be solved, however. Moreover, egalitarian concerns are of crucial importance in most countries and they require to go further than collective risk pooling and to take into account that society is more than a system of self-interested monetary transfers between and within cohorts.