Working Paper

Pension Funds and the Impact of Switching Regulation on Long-Term Investment

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collection.link.5
https://openknowledge.worldbank.org/handle/10986/9
collection.name.5
Policy Research Working Papers
dc.contributor.author
Pedraza Morales, Alvaro Enrique
dc.contributor.author
Fuentes, Olga
dc.contributor.author
Searle, Pamela
dc.contributor.author
Stewart, Fiona
dc.date.accessioned
2017-07-19T18:20:51Z
dc.date.available
2017-07-19T18:20:51Z
dc.date.issued
2017-07
dc.date.lastModified
2017-12-14T04:12:28Z
dc.description.abstract
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.
en
dc.identifier
http://documents.worldbank.org/curated/en/289981499787589121/Pension-funds-and-the-impact-of-switching-regulation-on-long-term-investment
dc.identifier.uri
http://hdl.handle.net/10986/27646
dc.language
English
dc.language.iso
en_US
dc.publisher
World Bank, Washington, DC
dc.relation.ispartofseries
Policy Research Working Paper;No. 8143
dc.rights
CC BY 3.0 IGO
dc.rights.holder
World Bank
dc.rights.uri
http://creativecommons.org/licenses/by/3.0/igo
dc.subject
REGULATION
dc.subject
PENSION FUNDS
dc.subject
INVESTMENT
dc.subject
PORTFOLIO
dc.subject
ACCOUNTABILITY
dc.subject
LIQUIDITY
dc.title
Pension Funds and the Impact of Switching Regulation on Long-Term Investment
en
dc.type
Working Paper
en
okr.date.disclosure
2017-07-11
okr.doctype
Publications & Research
okr.doctype
Publications & Research :: Policy Research Working Paper
okr.docurl
http://documents.worldbank.org/curated/en/289981499787589121/Pension-funds-and-the-impact-of-switching-regulation-on-long-term-investment
okr.googlescholar.linkpresent
yes
okr.identifier.doi
10.1596/1813-9450-8143
okr.identifier.externaldocumentum
090224b084db9ad6_1_0
okr.identifier.internaldocumentum
27735566
okr.identifier.report
WPS8143
okr.imported
true
okr.language.supported
en
okr.pdfurl
http://documents.worldbank.org/curated/en/289981499787589121/pdf/WPS8143.pdf
en
okr.topic
Finance and Financial Sector Development :: Financial Regulation & Supervision
okr.topic
Finance and Financial Sector Development :: Non Bank Financial Institutions
okr.topic
Governance :: Governance and the Financial Sector
okr.topic
Private Sector Development :: Corporate Governance and Corruption
okr.topic
Social Protections and Labor :: Pensions & Retirement Systems
okr.unit
Finance and Markets Global Practice Group

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