Polish Pension Funds, Does The System Work? Cost, Efficiency and Performance MeasurementIssues
AbstractThis paper is a part of the author's wider research on the current Polish pension fund system. It deals with the systemfs efficiency from the point of view of the individual fund member. After over three years of functioning, the savings accumulated with the pension funds only slightly exceed the total premiums that have so far been paid. The study shows that the system is not cost effective and that the incentives produced by the fees and the peer-based performance measurement frameworks have a detrimental impact on active investment management. The low net results from the second pillar are also caused partly by the relatively low share of the funded component of the retirement premium. It is shown that considerable cost improvements can be obtained by immediate corrections. However, more fundamental changes in the system are suggested. In particular, the fee structure should be rearranged to create better motivation for active management. To achieve this, the penalty institution of minimal required rate of return should be abandoned. Furthermore, the investment limits should be reconsidered to allow for greater diversification and higher long-run risk to overcome the capacity problem of the local stock market. This study shows that the evaluation of funds should employ an external index to avoid herding and to allow a long-run investment strategy for retirement purposes. Several possible candidates for benchmarks are proposed.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by EconWPA in its series Public Economics with number 0302001.
Length: 51 pages
Date of creation: 04 Feb 2003
Date of revision:
Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on Epson; pages: 51 ; figures: included. pdf file, 51 pages
Contact details of provider:
Web page: http://22.214.171.124
Pension reform; public pensions; pension funds; government regulation;
Find related papers by JEL classification:
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-02-10 (All new papers)
- NEP-CFN-2003-02-10 (Corporate Finance)
- NEP-EEC-2003-02-10 (European Economics)
- NEP-PKE-2003-02-10 (Post Keynesian Economics)
- NEP-TRA-2003-02-10 (Transition Economics)
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.:
- Feldstein, Martin & Horioka, Charles, 1980.
"Domestic Saving and International Capital Flows,"
Royal Economic Society, vol. 90(358), pages 314-29, June.
- David Blake & John Board, 2000. "Measuring Value Added in the Pensions Industry," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 25(4), pages 539-567, October.
- Nagorniak, John, 1982. " Risk Adjusted Equity Performance Measurement," Journal of Finance, American Finance Association, vol. 37(2), pages 555-61, May.
- 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.
- Del Guercio, Diane, 1996. "The distorting effect of the prudent-man laws on institutional equity investments," Journal of Financial Economics, Elsevier, vol. 40(1), pages 31-62, January.
- Steven J. Davis & Paul Willen, 2000.
"Occupation-Level Income Shocks and Asset Returns: Their Covariance and Implications for Portfolio Choice,"
CRSP working papers
523, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Steven J. Davis & Paul Willen, 2000. "Occupation-Level Income Shocks and Asset Returns: Their Covariance and Implications for Portfolio Choice," NBER Working Papers 7905, National Bureau of Economic Research, Inc.
- Davis, Steven J. & Willen, Paul S., 2013. "Occupation-level income shocks and asset returns: their covariance and implications for portfolio choice," Working Papers 13-9, Federal Reserve Bank of Boston, revised 24 Oct 2013.
- Deborah Lucas, 2001. "Investing Public Pensions in the Stock Market: Implications for Risk Sharing, Capital Formation and Public Policy in the Developed and Developing World," International Review of Finance, International Review of Finance Ltd., vol. 2(3), pages 179-202.
- Roll, Richard, 1978. "Ambiguity when Performance is Measured by the Securities Market Line," Journal of Finance, American Finance Association, vol. 33(4), pages 1051-69, September.
- Peterson, David & Rice, Michael L, 1980. " A Note on Ambiguity in Portfolio Performance Measures," Journal of Finance, American Finance Association, vol. 35(5), pages 1251-56, December.
- Ravi Jagannathan & Narayana R. Kocherlakota, 1996. "Why should older people invest less in stock than younger people?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 11-23.
- Lakonishok, Joseph & Shleifer, Andrei & Vishny, Robert W., 1992. "The Structure and Performance of the Money Management Industry," Scholarly Articles 10498059, Harvard University Department of Economics.
- Chlon, Agnieszka & Gora, Marek & Rutkowski, Michal, 1999. "Shaping pension reform in Poland : security through diversity," Social Protection Discussion Papers 20852, The World Bank.
- Elton, Edwin J, et al, 1993. "Efficiency with Costly Information: A Reinterpretation of Evidence from Managed Portfolios," Review of Financial Studies, Society for Financial Studies, vol. 6(1), pages 1-22.
- Ross, Stephen A, 1989. " Institutional Markets, Financial Marketing, and Financial Innovation," Journal of Finance, American Finance Association, vol. 44(3), pages 541-56, July.
- Martin T. Bohl, Judith Lischewski and Svitlana Voronkova, 2008. "Does Regulation Hurt Pension Funds' Performance? Evidence from Strongly Regulated Pension Fund Industries," The Institute for International Integration Studies Discussion Paper Series iiisdp247, IIIS.
- Michal Slavík, 2006. "The Czech Pension System and the Perspectives of Its Reform," Prague Economic Papers, University of Economics, Prague, vol. 2006(3), pages 214-230.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).
If references are entirely missing, you can add them using this form.