The Four Pillars is a research programme set up in 1987 by the Geneva Association, also known as the International Association for the Study of Insurance Economics. The aim of the Four Pillars research programme is to study the key importance in the new service economy of Social Security, Insurance, Savings and Employment. The programme focuses on the future of pensions, welfare and employment. The Geneva Association launched its Four Pillars research programme with a view to identifying possible solutions to the issue of the future financing of pensions and, more generally, to organising social security systems in our post-industrial societies. Demographic trends - especially increased life and health expectancy - could be seen as positive if we were able to devise ways of enabling "ageing in good-health populations" to make a valid economic and social contribution to the functioning of our service economies over the decades to come.
The concept of the Four Pillars owes its origin to the fact that in most countries the funding of pensions is based on three pillars:
The Geneva Association advocated in its publications and seminars a strengthening of the 2nd pillar and further development of 3rd pillar resources. However, the attention of the Geneva Association has focused above all on a 4th pillar i.e. the future need for a flexible extension of work-life, mainly on a part-time basis, in order to supplement income from the three existing pillars. The reorganization of end-of-career and the new age-management strategy - in which gradual retirement is destined to play a key role - involved in establishing this pillar, also correspond to many of the changes (e.g. in quality of work and the life cycle) that are specific to our contemporary service economies.[1]
The research programme has had four main objectives:
Over the years, the main activities of the Four Pillars programme have included:
The Four Pillars research programme is relevant to the insurance sector in six main areas:
The current need for reforming social security has been felt in all countries. The main objective of this reform has been to reduce the hitherto substantial share of the GDP devoted to social expenditure. The key challenge here has been to consolidate the partnership between the public and private sectors. Almost all States have had to redesign or readjust their welfare policies on health and pensions so as to avoid creating public deficits which would otherwise place too great a burden upon future generations.
With recent and current reforms of public pensions aimed at future sustainability - involving inevitably a fall in the relative level of old-age benefits - the development of second and third pillar pensions has become a priority. In many countries, second pillar pensions have been made compulsory and, where not already compulsory, have been encouraged by all kinds of financial and fiscal incentives. Private pension funds will play a growing role in securing future retirement income.
It however must be understood that even substantial development of second and third pillar pensions will probably not be sufficient to compensate both longer life-expectancy and a rising proportion of people over 65 years. With good health expectancy it is not only possible but also essential to plan for flexible extension of working life. Pension funds must encourage and facilitate this extension which will also benefit the insurance sector workforce.
In a more general way, it is essential to encourage long-term savings for retirement and longer-life expectancy. Insurance companies have a key role in designing adequate and tailored products to cater to a wide range of needs and means.
In insurance, as in other sectors of the economy, workforce ageing will require planning for improved age management as a matter of urgency. The Geneva Association's studies at the European and international levels have shown that, among other things, continuing training, worktime reduction, job redesign and a review of the seniority-pay principle, will need increasingly to be addressed by individual insurance companies. Codes of employment might be an ideal place to start in developing new age management strategies.
Developing multi-pillar pension systems and promoting an extension of occupational life depend on certain conditions being met and will need to be preceded by a coherent, broad-based, informed and ongoing debate of all these issues. With the research programme and its fourth-pillar proposals, the Geneva Association has been able to do pioneer work in this field and has (probably) made a significant contribution to this all-important debate.