The Impact of Scale, Complexity, and Service Quality on the Administrative Costs of Pension Funds: A Cross-Country Comparison

Administrative costs per participant appear to vary widely across pension funds in different countries. Using unique data on 90 pension funds over the period 2004—2008, this article examines the impact of scale, the complexity of pension plans, and service quality on the administrative costs of pens...

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Bibliographic Details
Published in:The Journal of risk and insurance 2012-06, Vol.79 (2), p.477-514
Main Authors: Bikker, Jacob A., Steenbeek, Onno W., Torracchi, Federico
Format: Article
Language:English
Subjects:
Administrative expenses
Analysis
Chaos theory
Cost control
Customer services
Datasets
Defined benefit pension plan
Disability pensions
Economic costs
Economies of scale
Efficiency
Employee pension plans
Fees & charges
Literature reviews
Pension costs
Pension funds
Pension plans
Private pensions
Quality of service
Retirement
Studies
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Summary:Administrative costs per participant appear to vary widely across pension funds in different countries. Using unique data on 90 pension funds over the period 2004—2008, this article examines the impact of scale, the complexity of pension plans, and service quality on the administrative costs of pension funds, and compares those costs across Australia, Canada, the Netherlands, and the United States. We find that, except for Canada, large unused economies of scale exist. Higher service quality and more complex pension plans significantly raise costs. Administrative costs vary significantly across pension fund types, with differences amounting to 100 percent.
ISSN:0022-4367
1539-6975
DOI:10.1111/j.1539-6975.2011.01439.x