Legitimacy and pension reforms

A vignette study on pension system preferences of employees and the self-employed

Due to disappointing results, trust placed by Dutch citizens in their pension system declined in the wake of the financial crisis. A broad selection of potential solutions to this problem of declining trust and legitimacy has since been discussed. It has been proposed to alter the system’s workings by introducing choice options and customization, and by increasing transparency and flexibility. Literature however shows that legitimacy might not only come from the system’s workings and formal rules, but also from its eventual benefits. How do people weigh these sources of legitimacy with respect to the pension system? And do social groups differ in the way they do so? More generally, what provides legitimacy to the Dutch pension system? We test three hypotheses, derived from theories on legitimacy, with a vignette study amongst 3600 respondents. We hypothesize that the pension system is legitimized predominantly by the benefits it produces upon retirement. Indeed, based on a vignette study amongst 3600 Dutch individuals, we find that both the self-employed and employees tend to emphasize pension benefits when selecting ‘pension system scenarios’. Second, we expect and find that overall, the self-employed value the system’s workings and choice options more than employees. Finally, we expect that social groups with access to less economic, social, cultural and personal capital value the system’s benefits more than do individuals with more access to these sources of capital. This expectation was not broadly confirmed. We do find, however, that individuals with more access to economic and social capital seem less tolerant of low benefits but also have a weaker preference for high benefits, than individuals with less access to economic and social capital.