Study Finds Fee Disclosure Policy Needed for Defined Contribution Pension Plans
TORONTO, Aug. 27 /PRNewswire/ — A new research paper from the Rotman International Centre for Pension Management finds that a standardized international policy on fee disclosure would help pension plan participants become better informed consumers of Defined Contribution (DC) plan investment and administrative services. Each year participants in DC pension plans around the world pay billions of dollars in fees.
“Many people do not understand how large an effect an apparently small difference in fees can make on account balances at retirement,” say report authors John Turner and Hazel Witte. “Greater fee disclosure should be accompanied by great information on how to interpret the importance of fees.”
Taking into account the insights from behavioral economics, the study, “Fee Disclosure to Pension Participants: Establishing Minimum Requirements” proposes a standardized fee disclosure model which is used to assess the effectiveness of current disclosure requirements in Australia, Canada, Chile, Sweden, the United Kingdom, and the United States. The model shows that Sweden and Australia receive the top two rankings for disclosure effectiveness. While the cost of greater disclosure has been raised as an issue, Turner and Witte say that the cost borne by pension contributors would be at most small and there could be a reduction in costs paid due to contributors switching to lower cost funds. The complete study is online at http://www.rotman.utoronto.ca/icpm.
The Rotman International Centre for Pension Management (ICPM) has become a global catalyst for improving pension management. The Centre sponsors research and fosters dialogue that focuses on building better pension ‘deals’, better pension fund organizations, and better pension legislation and regulation. In addition, the Centre looks for opportunities to raise pensions-related content in undergraduate, graduate, and executive programs at the Rotman School and other education-oriented forums. Further details on the Rotman International Centre for Pension Management, including its research program, are available at http://www.rotman.utoronto.ca/icpm.
The Rotman School of Management at the University of Toronto is redesigning business education for the 21st century with a curriculum based on Integrative Thinking. Located in the world’s most diverse city, the Rotman School fosters a new way to think that enables the design of creative business solutions. The School is currently raising $200 million to ensure Canada has the world-class business school it deserves. For more information, visit http://www.rotman.utoronto.ca/.
Rotman School of Management
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