Hostname: page-component-848d4c4894-r5zm4 Total loading time: 0 Render date: 2024-07-06T07:27:54.132Z Has data issue: false hasContentIssue false
  • English
  • Français

Factors behind the administrative fees of private pension systems: an international analysis*

Published online by Cambridge University Press:  14 November 2013

DAVID TUESTA
DAVID TUESTA*
Affiliation:
BBVA Research and Centro para la Competitividad y Desarrollo – Universidad San Martín de Porres, Paseo de la Castellana 81, Madrid 28046, Spain (e-mail: david.tuesta@bbva.com)
Get access Rights & Permissions [Opens in a new window]

Abstract

This work has three objectives: first, to provide a comprehensive review of administrative fees; second, to construct a comparative data set for 53 countries; and third, to perform an empirical analysis that highlights the main determinants of pension fees from a world-wide perspective. The paper provides an econometric analysis by using panel data techniques. It finds the greater statistical significance of market size, result that is reinforced by mandatory pension schemes. Other factors, such as structural country conditions, market's vertical integration and the presence of an occupational pension scheme, seem to be less relevant.

Keywords

G23J32Pension feespension chargespensionsprivate pensionsdefined contribution
Type
Articles
Information
Journal of Pension Economics & Finance , Volume 13 , Issue 1 , January 2014 , pp. 88 - 111
Copyright
Copyright © Cambridge University Press 2013 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

*

The author is grateful for the comments received during two workshops held in The Pontificia Universidad Catolica of Peru on July 12 and October 28 of 2012. Special thanks to Luis Carranza of Universidad San Martín de Porres of Peru; Waldo Mendoza, Jorge Rojas and Mario Tello, of The Pontificia Universidad Catolica; Juan Yermo of the OECD; Angel Melguizo of the IADB; Diego Torres and Liverca Gomez of BBVA Research. The views expressed herein are the sole responsibility of the author and do not reflect the opinions of the institutions he is affiliated.

References

Arenas de Mesa, A., Bravo, D., Behrman, J., Mitchel, O. and Todd, P. (2008) The Chilean pension reform turns 25: lessons from the social protection survey. In Kay, S. and Sinha, T. (eds), Lessons from Pension Reform in the Americas. Oxford, UK: Oxford University Press, pp. 23–58.Google Scholar
Baily, M. and Kirkegaard, J. (2009) US Pension Reform: Lessons from Other Countries. Washington, DC: Peter Peterson Institute for International Economics.Google Scholar
Ballester, M., Fernandez, C.M. and Matallin, J. (2007) Analisis de las variables que determinan las comisiones de los planes de pensiones. Revista de Economia Financiera, 5(11): 38–63.Google Scholar
Barr, N. and Diamond, P. (2009) Reforming pensions: principles, analytical errors and policy directions. International Social Security Report, 62(2): 5–29.Google Scholar
Bateman, H., Kingston, G. and Piggott, J. (2001) Forced Saving: Mandating Private Retirement Income. Cambridge, UK: Cambridge University Press.Google Scholar
Baumol, W. and Willig, R. (1981) Fixed costs, sunk costs, entry barriers, and sustainability of monopoly. Quarterly Journal of Economics, 96(3): 405–431.CrossRefGoogle Scholar
Benartzi, S. and Thaler, R.H. (2007) Heuristics and biases in retirement savings behavior. Journal of Economic Perspectives, 21(3): 81–104.CrossRefGoogle Scholar
Bernal, N., Munoz, A., Perea, H., Tejada, J. and Tuesta, D. (2008) Una Mirada al Sistema de Pensiones Peruano. Lima, Peru: Editorial Norma.Google Scholar
Berstein, S. and Cabrita, C. (2007) Determinantes de la Eleccion de AFP en Chile: Nueva Evidencia a Partir de Datos Individuales. Estudios de Economia, 34(1): 5–31.Google Scholar
Bikker, J., Steenbeek, O. and Torracchi, F. (2010) The Impact of Scale, Complexity, and Service Quality on the Administrative Costs of Pension funds: A Cross-country Comparison. DNB Working Papers, No. 258. Amsterdam, Netherlands: De Nederlandsche Bank.Google Scholar
Bjeletic, J. and Tuesta, D. (2010) Reforma de Pensiones en Peru. In Escriva, J., Fuentes, E. and Garcia-Herrero, A. (eds), Las Reformas de los Sistemas de Pensiones en Latinoamerica: Avances y Temas Pendientes. Madrid, Spain: BBVA, pp. 259–316.Google Scholar
Cameron, C. and Trivedi, P. (2009) Microeconomics Using Stata. College Station, TX: Stata Press Publication.Google Scholar
Carranza, L., Melguizo, A. and Tuesta, D. (2012) Matching contributions in Colombia, Mexico and Peru: experiences and prospects. In Hinz, R., Holzmann, R., Tuesta, D. and Takayama, N. (eds), Matching Contributions for Pensions: An International Review. Washington, DC: The World Bank, pp. 193–214.CrossRefGoogle Scholar
Castaneda, P. and Rudolph, H. (2011) Upgrading Investment Regulations in Second Pillar Pension Systems: A Proposal for Colombia. Policy Research Working Paper No. 5775. Washington, DC: The World Bank.CrossRefGoogle Scholar
Congreso de la Republica del Peru (2012) Ley de Reforma del Sistema Privado de Pensiones. Ley 29903. Lima, Peru: Normas Legales.Google Scholar
Creighton, A. and Piggott, J. (2006) The structure and performance of mandated pensions. In Clark, G., Munnell, A. and Orzag, M. (eds), The Oxford Handbook of Pensions and Retirement Income. Oxford, UK: Oxford University Press, pp. 241–267.Google Scholar
De la Torre, A. and Rudolph, H. (2012) Building efficient 2nd pillars: market frictions and policy options. World Bank V Contractual Savings Conference, Washington, DC, January 9–11.Google Scholar
Dobronogov, A. and Murthi, M. (2005) Administrative fees and costs of mandatory private pensions in transition economies. Journal of Pensions Economics and Finance, 1(4): 31–55.CrossRefGoogle Scholar
Gill, I., Packard, T. and Yermo, J. (2005) Keeping the Promise of Social Security in Latin America. Washington, DC: The World Bank.Google Scholar
Greene, W. and Hensher, D. (2010) Modeling Order Choices: A Primer. Cambridge, UK: Cambridge, University Press.CrossRefGoogle Scholar
Greenwood, J., Sanchez, J. and Wang, C. (2010) Financing development: the role of information costs. American Economic Review, 100(4): 1875–1891.CrossRefGoogle Scholar
Hastings, J., Mitchel, O. and Chyn, E. (2011) Fees, framing and financial literacy in the choice of pension managers. In Mitchel, O. and Lussardi, A. (eds), Financial Literacy: Implications for Retirement Security and the Financial Marketplace. Oxford, UK: Oxford University Press, pp. 101–115.Google Scholar
Hinz, R. and Holzmann, R. (2005) Old Age Income Support in the 21st Century. Washington, DC: The World Bank.Google Scholar
Holland, S. (2008) Principal Component Analysis. Athens, GA: Department of Geology, University of Georgia. Available online at http://strata.uga.edu/software/pdf/pcaTutorial.pdf.Google Scholar
Holzmann, R., Hinz, R. and Tuesta, D. (2012) Early lessons from country experience with matching contribution scheme. In Hinz, R., Holzmann, R., Tuesta, D. and Takayama, N. (eds), Matching Contributions for Pensions: An International Review. Washington, DC: The World Bank, pp. 193–213.Google Scholar
Impavido, G., Lasagabaster, E. and Garcia-Huitron, M. (2010) New Policies for Mandatory Defined Contribution Pensions. Washington, DC: The World Bank.CrossRefGoogle Scholar
Inland Revenue Department and the Ministry of Economic Development of New Zealand (2006) KiwiSaver Act. Public Act 2006 No. 40. Wellington, New Zealand: IRD.Google Scholar
Jame, R. (2010) Organizational Structure and Fund Performance: Pension Funds vs. Mutual Funds. Rochester, NY: Social Science Research Network. Available online at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1540533.Google Scholar
James, E., Smalhout, J. and Vittas, D. (1999) Administrative Costs and the Organization of Individual Retirement Account Systems: A Comparative Perspective. Policy Research, Working Paper, No. 2554. Washington, DC: The World Bank.Google Scholar
Kotlikoff, L. (1998) Simulating the privatization of social security in general equilibrium. In Feldstein, Martin (ed.), Privatizing Social Security. Chicago, IL: University of Chicago Press, pp. 265–311.Google Scholar
Levy, S. (2008) Good intentions, Bad Outcomes: Social Policy, Informality and Economic Growth in Mexico. Washington, DC: Brookings Institution Press.Google Scholar
Mayorga, M. and Munoz, E. (2000) La Tecnica de Datos de Panel: Una Guia para su Uso e Interpretacion. Documento de Trabajo No. 5. San Jose, Costa Rica: Banco Central de Costa Rica.Google Scholar
Ministerio de Trabajo y Prevision Social (2011) Bases de Licitacion Publica para el Servicio de Administracion de Cuentas de Capitalizacion Individual. DCTO-24-2011. Santiago de Chile: Diario Oficial de la Republica de Chile-Normas Generales.Google Scholar
Mitchell, O. (1998) Administrative costs in public and private retirement systems. In Feldstein, M. (ed.), Privatizing Social Security. Chicago, IL: University of Chicago Press, pp. 403–456.Google Scholar
Modigliani, F. and Muralidhar, A. (2005) Rethinking Pension Reform. Cambridge, UK: Cambridge University Press.Google Scholar
Palmer, E. (2006) El Nuevo Sistema de Pensiones Sueco de Cuentas Individuales Capitalizadas. Documento de Trabajo No. 15. Santiago de Chile, Chile: Superintendencia de Administradoras de Fondos de Pensiones.Google Scholar
Paz, J. and Ugaz, R. (2003) El Sistema Privado de Pensiones: Un Enfoque de Costos Hundidos Endogenos. Revista Economia y Sociedad No. 50. Lima-Peru: CIES.Google Scholar
Pollner, J. and Lasaga, M. (2003) Peru's Private Pension System: An Analysis of its Evolution, Current Market Structure and Recommendations for Reform. Washington, DC: The World Bank. Available online at https://www.google.es/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&ved=0CDEQFjAA&url=http%3A%2F%2Fsiteresources.worldbank.org%2FINTLACREGTOPFINSECDEV%2FResources%2FPeru_Private_Pensions_Pollner.doc&ei=CfROUuX3B4fVswaq5IDYBg&usg=AFQjCNEdrOzX9IwhSYZkoQKtojZEAR-HTQ&bvm=bv.53537100,d.Yms.Google Scholar
Reyes, G. (2009) A centralized auction mechanism for the disability and survivors industry in Chile. In Das, S., Strovsky, M., Pennock, D. and Szymanski, B. (eds), Auction, Market Mechanisms and their Applications. Berlin, Germany: ICST, p. 25.CrossRefGoogle Scholar
Robles, E. (2012) Controlling Pension System Costs: IOPS Project on Costs and Fees. Santiago de Chile, Chile: Superintendencia de Pensiones. Available online at http://www.spensiones.cl/portal/institucional/578/articles-8609_recurso_3.pdf.Google Scholar
Rudolph, H. (2012) Fee structure: does it matter? World Bank V Contractual Savings Conference, Washington, DC, January 9–11. Available online at http://siteresources.worldbank.org/FINANCIALSECTOR/Resources/session7.pdf.Google Scholar
Sass, S. (2006) The development of employer retirement income plans: from the nineteenth century to 1980s. In Clark, G., Munnell, A. and Orzag, M. (eds), The Oxford Handbook of Pensions and Retirement Income. Oxford, UK: Oxford University Press, pp. 76–97.Google Scholar
Tapia, W. and Yermo, J. (2008) Fees in Individual Account Pension Systems: A Cross-Country Comparison. Working Paper on Insurance and Private Pensions No. 27. Paris, France: OECD.Google Scholar
Terradez, M. (2002) Analisis de Componentes Principales. Barcelona, Spain: Universita Oberta de Catalunya. Available online at http://www.uoc.edu/in3/emath/docs/Componentes_principales.pdf.Google Scholar
Whitehouse, E. (2000) Administrative Charges for Funded Pensions: An International Comparison and Assessment. Social Protection Discussion Paper Series No. 0016. Washington, DC: World Bank.Google Scholar
World Bank (1994) Averting the Old Age Crisis. Washington, DC: The World Bank.Google Scholar
Yermo, J. (2002) Revised Taxonomy for Pension Plans, Pension Funds and Pension Entities. Paris, France: OECD. Available online at http://www.oecd.org/finance/private-pensions/2488707.pdf.Google Scholar
Supplementary material: File

Tuesta Supplementary Material

Appendix

Download Tuesta Supplementary Material(File)
File 83 KB