Polish Pension Funds, Does The System Work? Cost, Efficiency and Performance MeasurementIssues
This paper is a part of the author's wider research on the current Polish pension fund system. It deals with the system fs 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.
|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://econwpa.repec.org|
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.:
- 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.
- 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.
- Nagorniak, John, 1982. " Risk Adjusted Equity Performance Measurement," Journal of Finance, American Finance Association, vol. 37(2), pages 555-61, May.
- 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.
- 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.
- 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.
- Martin Feldstein & Charles Horioka, 1979.
"Domestic Savings and International Capital Flows,"
NBER Working Papers
0310, National Bureau of Economic Research, Inc.
- 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.
- 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.
- Steven J. Davis & Paul Willen, 2013.
"Occupation-Level Income Shocks and Asset Returns: Their Covariance and Implications for Portfolio Choice,"
Quarterly Journal of Finance (QJF),
World Scientific Publishing Co. Pte. Ltd., vol. 3(03), pages 1350011-1-1.
- 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.
- 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.
- Chlon, Agnieszka & Gora, Marek & Rutkowski, Michal, 1999. "Shaping pension reform in Poland : security through diversity," Social Protection and Labor Policy and Technical Notes 20852, The World Bank.
- Ross, Stephen A, 1989. " Institutional Markets, Financial Marketing, and Financial Innovation," Journal of Finance, American Finance Association, vol. 44(3), pages 541-56, July.
- 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.
- 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.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwppe:0302001. See general information about how to correct material in RePEc.
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.