Saving with group or individual personal pension schemes: How much difference does it make?

Ania Zalewska

doi:10.1287/mnsc.2021.4083

Saving with group or individual personal pension schemes: How much difference does it make?

Ania Zalewska

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Abstract

The quality of services provided by institutional investors has attracted considerable attention. This paper adds to the debate by showing that institutional differences in setting up defined contribution personal schemes have an economically and statistically significant impact on the returns. Using a sample of 10,326 UK defined contribution personal pension funds over July 1990-June 2019, I show that pension funds that have a third party involved in contract setting and subsequent oversight deliver 0.96%-1.67% higher gross returns and charge 0.7% lower fees than pension funds offered directly to the public without any well-informed third party involved. I also show that the introduction of additional governance bodies in 2015 resulted in a widening of the performance gap, which further supports the notion that investment governance has a material impact on fund performance. The results highlight the importance of investment oversight and call for more protection for individual investors.

Original language	English
Pages (from-to)	5384-5402
Number of pages	19
Journal	Management Science
Volume	68
Issue number	7
Early online date	27 Aug 2021
DOIs	https://doi.org/10.1287/mnsc.2021.4083
Publication status	Published - 31 Jul 2022

Bibliographical note

Funding Information:
This research was initiated during the author's research visit to New York University's Stern School of Business. The author thanks editor Tomasz Piskorski, the associate editor, and the anonymous reviewers for their invaluable support during the revision process. Moreover, the author thanks Tom Berglund, Paul Grout, Michel Habib, Michael Haliassos, Steven Ongena, Per Östberg, and David Stolin; participants of the 2017 Multinational Finance Society Annual Meeting, the 16th Annual Conference on Pensions, Insurance and Savings at NOVA University Lisbon, and the 7th Asset Management Summit in Luxembourg; and participants of seminars at the Institute for Banking and Finance at the University of Zurich, Toulouse Business School, IPAG Business School, Le Mans University, Newcastle Business School, Nottingham Business School, Liverpool Business School, Surrey Business School, Southampton Business School, and Swansea Business School for their comments and suggestions. The author also thanks David Yermack for helpful discussions.

Publisher Copyright:
© 2021 INFORMS

Keywords

benchmarks
defined contributions
governance
individual investors
pension funds
performance

ASJC Scopus subject areas

Strategy and Management
Management Science and Operations Research

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10.1287/mnsc.2021.4083

GPPvIPP-2021-ZalewskaAccepted author manuscript, 1.04 MB

Cite this

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abstract = "The quality of services provided by institutional investors has attracted considerable attention. This paper adds to the debate by showing that institutional differences in setting up defined contribution personal schemes have an economically and statistically significant impact on the returns. Using a sample of 10,326 UK defined contribution personal pension funds over July 1990-June 2019, I show that pension funds that have a third party involved in contract setting and subsequent oversight deliver 0.96%-1.67% higher gross returns and charge 0.7% lower fees than pension funds offered directly to the public without any well-informed third party involved. I also show that the introduction of additional governance bodies in 2015 resulted in a widening of the performance gap, which further supports the notion that investment governance has a material impact on fund performance. The results highlight the importance of investment oversight and call for more protection for individual investors.",

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Saving with group or individual personal pension schemes: How much difference does it make?

Abstract

Bibliographical note

Keywords

ASJC Scopus subject areas

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