Efficiency of Pension Funds Management in OECD Countries: Registered Retirement Savings Plan in Canada

Blerina Mucaj
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Blerina Mucaj: Eastern Mediterranean University, North Cyprus

No 2006-05, Development Discussion Papers from JDI Executive Programs

Abstract: Pension funds collect and invest the money contributed by the employer or the employee, postponing a part of the employee’s total compensation during the working years until retirement. While performing this function, an important issue that deserves special attention is the efficiency of managing these funds. Administrative costs affect this efficiency because every dollar uneconomically spent on administration is a dollar which could possibly go to plant participants. Investigation made in this thesis on the available studies concerning the efficiency of administering pension funds in the OECD area revealed that based on the experience of selected OECD countries and Chile, the cost of managing the retirement funds depends on the structure of the pension scheme. Decentralized pension funds characterized by a high level of services and high marketing costs report higher administrative expenses as compared to centrally managed pension funds which provide a lower level of services incurring very low or no marketing costs at all. Also, this thesis evaluates the efficiency of administering the retirement savings in Canada under the RRSP scheme provided that the account is invested in GICs. The research concludes that all the RRSP administrators obtain large benefits from accessing these long-term funds since they offer identical interest rates on GICs within the RRSP and outside it without imposing any administrative fee on their customers. This zero-level of fees does not have any impact on the future amount of pension benefits.

Keywords: pension funds; efficiency; administration; administrative costs; RRSP. (search for similar items in EconPapers)
JEL-codes: H55 H75 J26 J32 (search for similar items in EconPapers)
Pages: 90 pages
Date: 2006-05
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Citations: View citations in EconPapers (1)

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