The political dimension of the pension problem is to a very large extent a question of how the diverging preferences expressed by different groups in society will be aggregated. The ability of each individual group to influence policy will depend on a range of factors, such as its power resources, the political appeal of its cause and so forth. A crucial variable, however, is likely to be the extent to which political institutions allow non-governmental actors the opportunity to influence policy-making.

Relying mainly on the work of new-institutionalists, this chapter aims to set out a framework for understanding the paths to reform chosen by different countries. Its key independent variable is the degree of power concentration granted to governments by political institutions, although it is also pointed out that the design of pension schemes can provide powerful incentives for governments to act in given directions. Social and political variables are not totally neglected either, although the selection of cases allows us to control for most of these non-institutional variables. Prior to reform, Britain, Switzerland and France were experiencing budget deficits, and, at the time of reform, all three political systems were dominated by right-of-centre majorities committed to retrenching in the area of pensions. In all three countries, governments expected substantial increases in pension expenditure due to population ageing. Since most non-institutional variables are kept constant in the sample, the analysis of pension reform in these three countries is likely to highlight the impact of political institutions on government capabilities and on the ability of political systems to bring about and sustain policy change.