Disclosure, hidden charges and indexed pensions

Article


Beal, Diana, Delpachitra, Sarath and Grundy, Bruce. 2005. "Disclosure, hidden charges and indexed pensions." Agenda: a journal of policy analysis and reform. 12 (1), pp. 33-46.
Article Title

Disclosure, hidden charges and indexed pensions

ERA Journal ID40194
Article CategoryArticle
AuthorsBeal, Diana (Author), Delpachitra, Sarath (Author) and Grundy, Bruce (Author)
Journal TitleAgenda: a journal of policy analysis and reform
Journal Citation12 (1), pp. 33-46
Number of Pages14
Year2005
Place of PublicationCanberra, Australia
ISSN1322-1833
1447-4735
Web Address (URL)http://epress.anu.edu.au/agenda/012/01/12-1-A-1.pdf
Abstract

This paper analyses the cash flows of lifetime indexed pensions as one source of apparent super-profitability in the funds management industry. We conclude that, in practice, the difference between the amount paid for the pension and the present value of the pension income is huge - around 30% of the amount paid for the pension. With most products, the funds-management industry takes clients' funds, invests to the best of its ability and charges fees for those management services. Risk is borne by the clients. Lifetime indexed pensions are an exceptional product, where managers bear more aspects of risk. Naturally, there must be a payment or reward for bearing risk, but the size of that reward vis-a-vis the incidence of risk is open to question. More importantly the reward is, at present, substantially undisclosed. The next section of the paper describes lifetime indexed pensions and reports a small market survey conducted by the authors, while the next section reports the methodology used and analyses cash flows. The following section argues some possible rationalizations that may be proposed by financial institutions to justify the undisclosed 'fees' while the final section discusses policy issues and proposes minimal disclosure requirements.

Keywordsretirement; disclosure; hidden charges; indexed pensions
ANZSRC Field of Research 2020440305. Population trends and policies
380199. Applied economics not elsewhere classified
380107. Financial economics
Public Notes

File reproduced in accordance with the copyright policy of the publisher/author.

Byline AffiliationsDepartment of Finance and Banking
School of Accounting, Economics and Finance
University of Melbourne
Permalink -

https://research.usq.edu.au/item/9x7x3/disclosure-hidden-charges-and-indexed-pensions

Download files


Published Version

Submitted Version
Disclosure_final_(2).pdf
File access level: Anyone

  • 1988
    total views
  • 971
    total downloads
  • 2
    views this month
  • 1
    downloads this month

Export as

Related outputs

A travel cost analysis of the value of Carnarvon Gorge National Park for recreational use: reprise
Beal, Diana. 1998. "A travel cost analysis of the value of Carnarvon Gorge National Park for recreational use: reprise." The Australian Journal of Agricultural and Resource Economics. 42 (3), pp. 267-268. https://doi.org/10.1111/1467-8489.00051
Introducing corporate finance
Beal, Diana and Goyen, Michelle. 2005. Introducing corporate finance. Brisbane, Australia. John Wiley & Sons.
A travel cost analysis of the value of Carnarvon Gorge National Park for recreational use
Beal, Diana. 1995. "A travel cost analysis of the value of Carnarvon Gorge National Park for recreational use ." Review of Marketing and Agricultural Economics. 63 (2), pp. 292-303.
Accounting: business reporting for decision making
Birt, Jacqueline, Chalmers, Keryn, Beal, Diana, Brooks, Albie, Byrne, Suzanne and Oliver, Judy. 2008. Accounting: business reporting for decision making. Brisbane, Australia. John Wiley & Sons.
Which consumer debtors decide to enter a Part IX agreement?
Beal, Diana, Delpachitra, Sarath, Mason, Rosalind and Troedson, David. 2004. "Which consumer debtors decide to enter a Part IX agreement?" Australian Business Law Review. 32 (1), pp. 7-16.
Activity-based costing and process benchmarking: an application to general insurance
Delpachitra, Sarath. 2008. "Activity-based costing and process benchmarking: an application to general insurance." Benchmarking: an international journal. 15 (2), pp. 137-147. https://doi.org/10.1108/14635770810864857
Putting your money where your mouth is: a profile of ethical investors
Beal, Diana and Goyen, Michelle. 1998. "Putting your money where your mouth is: a profile of ethical investors." Financial Services Review. 7 (2), pp. 129-143.
Are ethical investors real?
Beal, Diana and Goyen, Michelle. 1998. "Are ethical investors real?" Bruce, Brian R. (ed.) The investment research guide to socially responsible investing. Plano, Texas. Colloquium on Socially Responsible Investing, Center for Investment Research.
Process benchmarking: an application to lending products
Delpachitra, Sarath and Beal, Diana. 2002. "Process benchmarking: an application to lending products." Benchmarking: an international journal. 9 (4), pp. 409-420. https://doi.org/10.1108/14635770210442725
Rural communities: adjusting to a future without bank branches
Ralston, Deborah and Beal, Diana. 2000. "Rural communities: adjusting to a future without bank branches." Economic Papers: a journal of applied economics and policy. 19 (4), pp. 79-94. https://doi.org/10.1111/j.1759-3441.2000.tb00977.x
On risk-return relationship: an application of GARCH (p,q)-M model to Asia _ Pacific region
Yakob, Noor Azuddin and Delpachitra, Sarath. 2007. "On risk-return relationship: an application of GARCH (p,q)-M model to Asia _ Pacific region." International Journal of Science and Research. 2 (1), pp. 33-39.
Factors influencing planning for retirement
Delpachitra, Sarath and Beal, Diana. 2002. "Factors influencing planning for retirement." Economic Papers: a journal of applied economics and policy. 21 (3), pp. 1-13.
Financial literacy among Australian university students
Beal, Diana and Delpachitra, Sarath. 2003. "Financial literacy among Australian university students." Economic Papers: a journal of applied economics and policy. 22 (1), pp. 65-78.
An electronic commerce initiative in regional Sri Lanka: the vision for the central province electronic commerce portal
Lane, Michael S., Van Der Vyver, Glen, Delpachitra, Sarath and Howard, Srecko. 2004. "An electronic commerce initiative in regional Sri Lanka: the vision for the central province electronic commerce portal." The Electronic Journal of Information Systems in Developing Countries. 16 (1), pp. 1-18.
Seasonality in the Asia Pacific stock markets
Yakob, Noor Azuddin, Beal, Diana and Delpachitra, Sarath. 2005. "Seasonality in the Asia Pacific stock markets." The Journal of Asset Management. 6 (4), pp. 298-318.
Risk-return relationship from the Asia Pacific perspective
Yakob, Noor Azuddin, Beal, Diana and Delpachitra, Sarath. 2005. "Risk-return relationship from the Asia Pacific perspective." Daly, Kevin (ed.) 3rd Financial Markets Asia-Pacific Conference. Sydney, Australia 26 - 27 May 2005 Sydney, Australia.
Banking in the bush (1993-2003): a decade of change
Beal, Diana and Delpachitra, Sarath. 2005. "Banking in the bush (1993-2003): a decade of change." Economic Papers: a journal of applied economics and policy. 24 (1), pp. 61-74.
Why do we invest ethically?
Beal, Diana, Goyen, Michelle and Phillips, Peter J.. 2005. "Why do we invest ethically?" The Journal of Investing. 14 (3), pp. 66-77.