"Canada, Denmark, the Netherlands and Sweden have advanced multi-pillar pension systems. Using micro-simulations, this article presents a close examination of the interaction of pillars in these countries. The relative importance and the role of the different pension pillars vary from country to country, and according to age, income, gender and socio-economic dimensions as well as between generations. A further area of investigation is the mitigation capacity of the four pension systems. On the one hand, adverse labour careers lead to lower life-time earnings and lower private pension accruals. On the other hand, these effects are mitigated through the design of pillars and their interaction. Mitigation is important to income security and stability in retirement and to post-retirement income distribution. However, mitigation mechanisms come at the cost of incentives. Moreover, in many countries, the generosity of public benefits is set to decrease – increasing the importance of private pensions. This will shift risk and uncertainty from employers and pension institutions to individuals. Thus, risks and uncertainties related to private pensions will become more important, raising questions about the division of responsibilities between public and private pensions, and about the potential of mitigating such risk through pillar interaction. These concerns are further reinforced by labour market changes. Although a pension system free of distortions is inconceivable, this article seeks to contribute to addressing how mitigation should be designed, and how mitigation and risk sharing should be balanced against incentives, challenges which are as much political as technical."

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