Governance: An International Journal of Policy, Administration, and Institutions, Vol. 20, No. 1, January 2007 (pp. 85–107). © 2007 The Author Journal compilation © 2007 Blackwell Publishing, 350 Main St., Malden, MA 02148, USA, and 9600 Garsington Road, Oxford, OX4 2DQ, UK. ISSN 0952-1895 Blackwell Publishing IncMalden, USAGOVEGovernance0952-18952007 Blackwell Publishing Ltd.January 200720185107Articles THE CASE OF FUNDED PENSIONS IN FRANCEBRUNO PALIER *CNRS/Sciences Po Paris Tracking the Evolution of a Single Instrument Can Reveal Profound Changes: The Case of Funded Pensions in France BRUNO PALIER* Paygo pension schemes are said to be difficult to transform. However, the study of the French pension system shows that progressively, funded schemes play a greater role in the transformation. This change has been possible, despite path-dependent forces, through four sequences. First, the change is based on a diagnosis shared among most actors, which challenges the instruments chosen in the past. Second, the new instruments are chosen in opposition to the past. Third, the new measures are adopted on the basis of an ambiguous, even contradictory, agreement. Finally, the new instruments expand incrementally, but their development is leading to cumulative change and a profound transformation of both the logic and the structure of the pension system. The history of retirement pension policies reveals that all countries in the developed world have been through four different phases, each marked by a main objective. Pension systems began to emerge in the nineteenth century or the interwar period, with the chief objective of combating poverty among people who were too old to work. After the Second World War, pension systems were organized and extended, the aim then being to guarantee replacement income to all retired people. From 1960 to 1970, retirement pensions became considerably more generous: the intention was to reduce inequalities between people active in the labor force and the inactive—or even between retired people themselves—partly with the Keynesian objective of maintaining the capacity of nonworking people to consume. At the end of the twentieth century, the history of retirement pensions entered a new phase and, over the last 15 years, policies have all aimed to reduce public expenditure on pensions. These reforms have been undertaken partly in response to the aging of the population— notably through increased longevity—but also in order to adapt pension systems to the new economic context marked by the opening up of econ- omies and the importance of supply-side economic policies (Palier 2003a). Although it can be shown that all developed countries have had sim- ilar objectives for their pension policies, it is clear that the instruments