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Administrative charges in pensions in Chile, Malaysia, Zambia, and the United States

Author

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  • Valdes-Prieto, Salvador

Abstract

The author offers a framework for an international comparison of charges in mandatory and private pension systems, and in state-run and privately managed systems. Such comparisons make it possible to determine which combinations of quality and cost make the most sense in pension services. He finds that: 1) Charges in the private annuity industry are much higher than other components of the pension package, and much higher than publicly provided annuities in the US; 2) comparing the collection function in different countries is difficult. In Chile, Malaysia and Zambia, the pension system must collect contributions on its own. In the US, the Social Security Administration piggybacks off the collection of federal income tax. A mandatory pension system could be used as a base for organizing other services, such as mandatory health care contributions and widely based income taxes, at a low marginal cost; 3) in the US, there is no reliable information on the cost of the active-life portion of social security; 4) Chilean AFPs (Administradoras de Fondos de Pensiones) charge slightly more for the active life portion of pension services than the international average for similar services, but appear to offer better quality service; and 5) marketing costs for Chilean AFPs -- which arise because of workers'freedom to select providers -- were just 6 percent of lifetime charges in 1991.

Suggested Citation

  • Valdes-Prieto, Salvador, 1994. "Administrative charges in pensions in Chile, Malaysia, Zambia, and the United States," Policy Research Working Paper Series 1372, The World Bank.
    • Handle: RePEc:wbk:wbrwps:1372
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    Citations

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    Cited by:

    1. Jacob A. Bikker & Onno W. Steenbeek & Federico Torracchi, 2012. "The Impact of Scale, Complexity, and Service Quality on the Administrative Costs of Pension Funds: A Cross-Country Comparison," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 79(2), pages 477-514, June.
    2. Vittas, Dimitri, 1997. "The Argentine pension reform and its relevance for Eastern Europe," Policy Research Working Paper Series 1819, The World Bank.
    3. Peter A. Diamond, 1996. "Proposals to Restructure Social Security," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 67-88, Summer.
    4. Peter Diamond, 1998. "The Economics of Social Security Reform," NBER Working Papers 6719, National Bureau of Economic Research, Inc.
    5. Jacob A. Bikker & Onno W. Steenbeek & Federico Torracchi, 2012. "The Impact of Scale, Complexity, and Service Quality on the Administrative Costs of Pension Funds: A Cross-Country Comparison," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 79(2), pages 477-514, June.
    6. Polackova, Hana, 1997. "Population aging and financing of government liabilities in New Zealand," Policy Research Working Paper Series 1703, The World Bank.
    7. Mantilla-García, Daniel & García-Huitrón, Manuel E. & Concha-Perdomo, Alvaro & Aldana-Galindo, Julian R., 2023. "Is my pension fund more expensive? Estimating equivalent assets-based and contribution-based management fees," Journal of Business Research, Elsevier, vol. 167(C).
    8. Olivia S. Mitchell, "undated". "Evaluating Administrative Costs in Mexico's AFORES Pension System," Pension Research Council Working Papers 99-1, Wharton School Pension Research Council, University of Pennsylvania.
    9. Olivia S. Mitchell, 1998. "Administrative Costs in Public and Private Retirement Systems," NBER Chapters, in: Privatizing Social Security, pages 403-456, National Bureau of Economic Research, Inc.
    10. Shah, Hemant, 1997. "Toward better regulation of private pension funds," Policy Research Working Paper Series 1791, The World Bank.
    11. Sluchynsky, Oleksiy, 2015. "Defining, measuring, and benchmarking administrative expenditures of mandatory social security programs," Social Protection Discussion Papers and Notes 95198, The World Bank.
    12. Vittas, Dimitri, 1998. "Regulatory controversies of private pension funds," Policy Research Working Paper Series 1893, The World Bank.

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