The charge ratio on individual accounts and investment plans in Iceland

Haukur Benediktsson, Tryggvi Herbertsson () and J. Michael Orszag

Applied Economics, 2001, vol. 33, issue 8, 979-987

Abstract: This paper documents the lifetime costs on individual accounts and investment plans for a typical worker in Iceland using typical wage profiles and information on current charges obtained from the providers. The charge ratios calculated imply that costs at a current cost basis on individual accounts are substantially lower in Iceland than for personal pensions in the UK and retail charges for individual pension accounts in other countries. The Icelandic charges are substantially lower than would ordinarily be expected in an emerging defined contribution market and given the low contribution rates associated with the Icelandic accounts. These low charges are attributed to a variety of factors including: low levels of regulation, competition for business between traditional financial institutions and workers' main pension funds and the perception of a growing market.

Date: 2001
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DOI: 10.1080/00036840121719

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