Pension Funds and the Impact of Switching Regulation on Long-Term Investment
This paper looks at the impact of members' ability to switch pension fund provider and /or portfolio on the allocation of pension funds to long-term investments. The level of annual turnover in pension fund portfolios was compared with the amo...
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World Bank, Washington, DC
2017
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| Online Access: | http://documents.worldbank.org/curated/en/289981499787589121/Pension-funds-and-the-impact-of-switching-regulation-on-long-term-investment http://hdl.handle.net/10986/27646 |
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okr-10986-276462021-06-14T10:12:11Z Pension Funds and the Impact of Switching Regulation on Long-Term Investment Pedraza Morales, Alvaro Enrique Fuentes, Olga Searle, Pamela Stewart, Fiona REGULATION PENSION FUNDS INVESTMENT PORTFOLIO ACCOUNTABILITY LIQUIDITY This paper looks at the impact of members' ability to switch pension fund provider and /or portfolio on the allocation of pension funds to long-term investments. The level of annual turnover in pension fund portfolios was compared with the amount of short-term investments (using government treasury bills and bank deposits as proxy). The investment regulations around switching and other market conduct were then considered. The paper finds that greater movements between pension fund providers and between portfolios is linked to increased holdings of short-term and more liquid assets. Switching appears to be driven by competition, market structure, and investment advice, and, unfortunately, frequently results in poor investment returns for members. The paper makes six recommends for regulators. First, use administrative controls to prevent fraudulent switching between pension providers. Second, provide clear performance and cost comparisons to inform members' choice of provider/fund and encourage informed decision making, which is beneficial for members and the system. Third, supervise and control advertising and marketing (including reporting of performance periods) carefully, to avoid switches based on misleading advice. Fourth, control financial incentives for sales agents, so that switching advice is given in members' interest and not for commercial gain. Fifth, concentrate issuance in government securities, to create more liquid instruments. And sixth, conduct further research on the concept of a central liquidity pool to manage unexpected outflows. 2017-07-19T18:20:51Z 2017-07-19T18:20:51Z 2017-07 Working Paper http://documents.worldbank.org/curated/en/289981499787589121/Pension-funds-and-the-impact-of-switching-regulation-on-long-term-investment http://hdl.handle.net/10986/27646 English en_US Policy Research Working Paper;No. 8143 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper |
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Digital Repository |
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Foreign Institution |
| institution |
Digital Repositories |
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World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
REGULATION PENSION FUNDS INVESTMENT PORTFOLIO ACCOUNTABILITY LIQUIDITY |
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REGULATION PENSION FUNDS INVESTMENT PORTFOLIO ACCOUNTABILITY LIQUIDITY Pedraza Morales, Alvaro Enrique Fuentes, Olga Searle, Pamela Stewart, Fiona Pension Funds and the Impact of Switching Regulation on Long-Term Investment |
| relation |
Policy Research Working Paper;No. 8143 |
| description |
This paper looks at the impact of
members' ability to switch pension fund provider and
/or portfolio on the allocation of pension funds to
long-term investments. The level of annual turnover in
pension fund portfolios was compared with the amount of
short-term investments (using government treasury bills and
bank deposits as proxy). The investment regulations around
switching and other market conduct were then considered. The
paper finds that greater movements between pension fund
providers and between portfolios is linked to increased
holdings of short-term and more liquid assets. Switching
appears to be driven by competition, market structure, and
investment advice, and, unfortunately, frequently results in
poor investment returns for members. The paper makes six
recommends for regulators. First, use administrative
controls to prevent fraudulent switching between pension
providers. Second, provide clear performance and cost
comparisons to inform members' choice of provider/fund
and encourage informed decision making, which is beneficial
for members and the system. Third, supervise and control
advertising and marketing (including reporting of
performance periods) carefully, to avoid switches based on
misleading advice. Fourth, control financial incentives for
sales agents, so that switching advice is given in
members' interest and not for commercial gain. Fifth,
concentrate issuance in government securities, to create
more liquid instruments. And sixth, conduct further research
on the concept of a central liquidity pool to manage
unexpected outflows. |
| format |
Working Paper |
| author |
Pedraza Morales, Alvaro Enrique Fuentes, Olga Searle, Pamela Stewart, Fiona |
| author_facet |
Pedraza Morales, Alvaro Enrique Fuentes, Olga Searle, Pamela Stewart, Fiona |
| author_sort |
Pedraza Morales, Alvaro Enrique |
| title |
Pension Funds and the Impact of Switching Regulation on Long-Term Investment |
| title_short |
Pension Funds and the Impact of Switching Regulation on Long-Term Investment |
| title_full |
Pension Funds and the Impact of Switching Regulation on Long-Term Investment |
| title_fullStr |
Pension Funds and the Impact of Switching Regulation on Long-Term Investment |
| title_full_unstemmed |
Pension Funds and the Impact of Switching Regulation on Long-Term Investment |
| title_sort |
pension funds and the impact of switching regulation on long-term investment |
| publisher |
World Bank, Washington, DC |
| publishDate |
2017 |
| url |
http://documents.worldbank.org/curated/en/289981499787589121/Pension-funds-and-the-impact-of-switching-regulation-on-long-term-investment http://hdl.handle.net/10986/27646 |
| _version_ |
1764465634883665920 |