Studies of the rise of private defined-contribution pensions traditionally focus on social policy concerns about the allocation of risks and costs for beneficiaries and employers. There is, however, another – low-salience, financial – dimension of pension privatisation. Regulations introducing minimum return guarantees in private pensions impact financial markets because they incentivise fund managers to invest plan portfolios in fixed-income securities rather than in equities. While different segments of the financial industry have divergent preferences over such guarantees, policy-makers are caught in a dilemma: Should they prioritise predictable benefit levels or equity market development? Using the case of the introduction of Germany’s ‘Riester-Rente’, we argue that, as politicians linked the introduction of private defined-contribution plans with cuts in statutory pensions, the re-emergence of a high-salience, social policy image of pensions helped insurance firms’ and some trade unionists’ case for minimum guarantees to prevail, thereby hindering equity market development in Germany
