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Operating costs of pension schemes

In: Costs and Benefits of Collective Pension Systems

Author

Listed:
  • J. A. Bikker

    (Dutch Central Bank)

  • J. Dreu

    (Dutch Central Bank)

Abstract

This chapter examines what type of pension scheme has the lowest operating costs. We first analyse the operating costs of Dutch pension funds, broken down by administrative and investment costs. Various cost-influencing factors are identified, including scale, pension fund type, plan type, outsourcing and reinsurance. Economies of scale are shown to be dominant in explaining differences in costs across pension schemes, leading to the conclusion that the consolidation of small pension funds could improve cost efficiency. In addition, the costs per participant of mandatory industry-wide pension funds turn out to be significantly lower than those of company pension funds. Next, the costs of pension schemes offered by pension funds and life insurers in the Netherlands are compared in an effort to distinguish between collective and private schemes. We find that the operating costs per participant of collective pension funds are many times lower than those of private schemes.

Suggested Citation

  • J. A. Bikker & J. Dreu, 2007. "Operating costs of pension schemes," Springer Books, in: Onno Steenbeek & Fieke Lecq (ed.), Costs and Benefits of Collective Pension Systems, chapter 4, pages 51-74, Springer.
    • Handle: RePEc:spr:sprchp:978-3-540-74374-3_4
    DOI: 10.1007/978-3-540-74374-3_4
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    Citations

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    Cited by:

    1. Ponds, Eduard H. M. & Riel, Bart Van, 2009. "Sharing risk: the Netherlands' new approach to pensions," Journal of Pension Economics and Finance, Cambridge University Press, vol. 8(1), pages 91-105, January.
    2. J.A. Bikker & L. Spierdijk, 2009. "Measuring and explaining competition in the financial sector," Working Papers 09-01, Utrecht School of Economics.
    3. Sluchynsky, Oleksiy, 2015. "Defining, measuring, and benchmarking administrative expenditures of mandatory social security programs," Social Protection Discussion Papers and Notes 95198, The World Bank.
    4. Sarker, Indranil & Datta, Bidisha, 2022. "Re-designing the pension business processes for achieving technology-driven reforms through blockchain adoption: A proposed architecture," Technological Forecasting and Social Change, Elsevier, vol. 174(C).

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