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Administrative Costs in Public and Private Retirement Systems

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Olivia S. Mitchell

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Abstract

This paper collects and analyzes available information on administrative costs associated with public and private retirement systems. We explore expenses of the US social security system and compare these with data from national systems in other countries. We find that administration costs of publicly-run social security systems vary a great deal across countries and institutional settings. A key factor influencing public old-age program costs is the system's scale: plans with more assets and more participants are less expensive. We also investigate expenses reported by US pension plans and mutual funds, programs seen by many as alternative mechanisms for managing retirement saving. Based on an analysis of costs associated with retirement savings plans managed by financial institutions, we conclude that privately managed old-age retirement programs would be somewhat more costly to operate than current publicly-managed programs, depending on the program's specific design. Nevertheless these costs would be accompanied by new services for participants.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5734.

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Date of creation: Aug 1996
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Publication status: published as Privatizing Social Security, Feldstein, Martin, ed., Chicago: Universityof Chicago Press, 1998, pp. 403-456.
Handle: RePEc:nbr:nberwo:5734

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Friedman, Benjamin M & Warshawsky, Mark J, 1990. "The Cost of Annuities: Implications for Saving Behavior and Bequests," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 135-54, February. [Downloadable!] (restricted)
  2. Olivia S. Mitchell, 1991. "Trends in Pension Benefit Formulas and Retirement Provisions," NBER Working Papers 3744, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Olivia S. Mitchell, 1993. "Retirement Systems in Developed and Developing Countries: Institutional Features, Economic Effects, and Lessons for Economies in Transition," NBER Working Papers 4424, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. 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. [Downloadable!]
  5. Elton, Edwin J, et al, 1993. "Efficiency with Costly Information: A Reinterpretation of Evidence from Managed Portfolios," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 6(1), pages 1-22. [Downloadable!] (restricted)
  6. Gardner, Lisa A. & Grace, Martin F., 1993. "X-Efficiency in the US life insurance industry," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 497-510, April. [Downloadable!] (restricted)
  7. Olivia S. Mitchell & Robert S. Smith, . "Public Sector Pension Funding," Pension Research Council Working Papers 94-4, Wharton School Pension Research Council, University of Pennsylvania.
  8. Barr, Nicholas, 1992. "Economic Theory and the Welfare State: A Survey and Interpretation," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 741-803, June. [Downloadable!] (restricted)
  9. Benjamin M. Friedman & Mark Warshawsky, 1990. "The Cost of Annuities: Implications for Saving Behavior and Bequests," NBER Working Papers 1682, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Ping-Lung Hsin & Olivia S. Mitchell, . "The Political Economy of Public Pensions: Pension Funding, Governance, and Fiscal Stress," Pension Research Council Working Papers 94-6, Wharton School Pension Research Council, University of Pennsylvania.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Luciano Greco, 2005. "The Optimal Design of Funded Pension Plans: Unbundling Financing and Investment," "Marco Fanno" Working Papers 0003, Dipartimento di Scienze Economiche "Marco Fanno". [Downloadable!]
  2. Andrew A. Samwick, 1997. "Discount Rate Heterogeneity and Social Security Reform," NBER Working Papers 6219, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. David Altig & Jagadeesh Gokhale, 1997. "Social Security privatization: a simple proposal," Working Paper 9703, Federal Reserve Bank of Cleveland. [Downloadable!]
  4. James, Estelle & Smalhout, James & Vittas, Dimitri, 2001. "Administrative costs and the organization of individual retirement account systems : a comparative perspective," Policy Research Working Paper Series 2554, The World Bank. [Downloadable!]
  5. Martin Feldstein, 1997. "Transition to a Fully Funded Pension System: Five Economic Issues," NBER Working Papers 6149, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Marco A. Espinosa-Vega & Tapen Sinha, 2000. "A primer and assessment of social security reform in Mexico," Economic Review, Federal Reserve Bank of Atlanta, issue Q1, pages 1-23. [Downloadable!]
  7. Joseph F. Quinn, 1997. "Criteria for Social Security Reform," Boston College Working Papers in Economics 367, Boston College Department of Economics. [Downloadable!]
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