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Fee-ling Stuck? Provider Choice in a Mandatory Defined Contribution Pension System

Author

Listed:
  • Piera Bello

    (Bergamo University)

  • Marius Cziriak

    (ZEW – Leibniz Centre for European Economic Research)

  • Mario Padula

    (Ca’ Foscari University of Venice)

Abstract

Fees play a critical role in shaping the pension benefits provided by defined contribution (DC) pension funds. Even small differences in fees, when compounded over a long contribution period, can lead to substantial disparities in retirement income. In this study, we focus on Chile — a country with a large, mandatory DC pension system — to examine how individuals choose among pension fund administrators. Despite a regulated fee structure that ensures transparency and the absence of switching costs, we observe significant fee dispersion across providers and low switching rates among participants. Our findings reveal that individuals with higher financial literacy and a better understanding of the institutional framework are significantly more likely to switch providers, thereby minimizing fees.

Suggested Citation

  • Piera Bello & Marius Cziriak & Mario Padula, 2025. "Fee-ling Stuck? Provider Choice in a Mandatory Defined Contribution Pension System," Working Papers 2025: 26, Department of Economics, University of Venice "Ca' Foscari".
    • Handle: RePEc:ven:wpaper:2025:26
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    Keywords

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    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G53 - Financial Economics - - Household Finance - - - Financial Literacy
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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