Pension fund governance

1
Pension fund governance

• Mihály Erdos
• Hungarian Financial Supervisory Authority (HFSA)

2
Pension plan is a financial service
further functions
cross selling
special offers
Base market service
consultancy
client services
Base product
insurance coverage
investment
3
Personal involvement in services
Therapy services
Services with intensive active client involvement
Services with intensive passive client involvement
Services with extensive client involvement
Do-it-yourself
Industry product with client activity
Basic industrial product
4
Different aspects of pension plans

• social
• social insurance
• human policy
• citizen awareness
• technical
• insurance policy
• employment status
• financial
• old age income
• investment vehicle

different institutional forms
5
Institutional variety
Pensionskasse
mutual assurance association
joint stock company
association
trust form
cooperative societies
foundation
Pensionsfond
mutual saving association
fund managing company
Unterstützungskasse
retirement savings account
6
Aspects of an institution

• internal relations
• asset structure
• personal involvement
• decision-making process
• profit-sharing
• external relations
• responsibilities in bankruptcy

7
Institutional form taxonomy (OECD)
legal title to pension assets no legal title to pension assets
legal personality and capacity corporate form foundation, trust
no legal per-sonality or capacity individual contractual form collective / group contractual form
8
Costs in the plan accumulation
institutional
Dead man walking
Saving Private Ryan
functional
Star Wars
Good Will Hunting
9
A beautiful mind
market players
old product new product
changes confusion success
no changes imperfect market market tightening
regulator
10
Conflict of interest
non-financial institution
financial institution
institutional market
retail market
strict walls
low regulation
consultants, disclosure
marketing costs
11
Agency problem
representatives
client
responsibility
knowledge
emotional service
Myners report
bounded rationality
proposal on directive
low cost sensitivity
consultants, ratings
disclosure?
12
Life is like a box of chocolates. You never know
what you are going to get.

• (Forrest Gump, 1994)