Pension fund efficiency: the impact of scale, governance and plan design

Jacob Bikker () and Jan de Dreu ()

DNB Working Papers from Netherlands Central Bank, Research Department

Abstract: Administrative and investment costs per participant appear to vary widely across pension funds. These costs are important because they reduce the rate of return on the investments of pension funds and consequently raise the cost of retirement security. This paper examines the impact of determinants of these costs, such as the size, governance, pension plan design and outsourcing decisions, using data on all Dutch pension funds across the 1992-2004 period, including more than 10,000 observations. We find that economies of scale dominate the strong dispersion in both administrative and investment costs across pension funds. Industry-wide pension funds are significantly more efficient than company funds and other funds. The operating costs of pension funds’ defined contribution plans are lower than those of defined benefit plans. Higher shares of pensioners make funds more costly, whereas the reverse is true when relatively many participants are inactive.

Keywords: Administrative costs; investment costs; economies of scale; pension plan design; governance; defined benefits; defined contribution; outsourcing; reinsurance. (search for similar items in EconPapers)
JEL-codes: D61 G14 G23 H55 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin, nep-fmk and nep-pbe
Date: 2006-08
View list of references

Downloads: (external link)
http://www.dnb.nl/binaries/WP%20109-2006_tcm46-146766.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:dnb:dnbwpp:109

Access Statistics for this paper

More papers in DNB Working Papers from Netherlands Central Bank, Research Department
Contact information at EDIRC.
Series data maintained by Arjen Siegmann ().