Fee-ling Stuck? Provider Choice in a Mandatory Defined Contribution Pension System

Piera Bello, Marius Cziriak and Mario Padula ()
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Piera Bello: Bergamo University
Marius Cziriak: ZEW – Leibniz Centre for European Economic Research
Mario Padula: Ca’ Foscari University of Venice

No 2025: 26, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

Abstract: Fees play a critical role in shaping the pension benefits provided by defined contribution (DC) pension funds. Even small differences in fees, when compounded over a long contribution period, can lead to substantial disparities in retirement income. In this study, we focus on Chile — a country with a large, mandatory DC pension system — to examine how individuals choose among pension fund administrators. Despite a regulated fee structure that ensures transparency and the absence of switching costs, we observe significant fee dispersion across providers and low switching rates among participants. Our findings reveal that individuals with higher financial literacy and a better understanding of the institutional framework are significantly more likely to switch providers, thereby minimizing fees.

Keywords: Fees; defined contribution pension funds; investment mistakes; investor sophistication (search for similar items in EconPapers)
JEL-codes: D14 G53 H55 J32 (search for similar items in EconPapers)
Pages: 67 pages
Date: 2025
New Economics Papers: this item is included in nep-age, nep-eur and nep-inv
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Persistent link: https://EconPapers.repec.org/RePEc:ven:wpaper:2025:26

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