Regulation of Pension Fund Assets
E. Philip Davis
This paper assesses the main issues in pension fund asset regulation.
It compares and contrasts the adopted solutions in the major OECD countries
and seeks to assess briefly some of the consequences which arise for
portfolio distributions an, consequently, for the cost of providing pensions.
As an introduction, the justifications for financial regulation are outlined in
the first section in general terms and their applicability to pension funds is
considered. The second section outlines the principal regulatory issues
affecting pension funds’ assets (covering portfolio regulations, funding
regulations and ownership of surpluses). The potential costs imposed by
such regulations are indicated by calculations of returns on pension fund
portfolios. An attempt is made in the final section to come to a view regarding
`good regulatory practice’ in this area. An annex looks briefly at regulatory
structures. Note that the paper abstracts from some important areas of
regulation of pension funds, namely those of liabilities (social security
integration, benefit insurance, indexation, portability, defined benefit/defined
contribution) and broader structural regulations (trustees, fraud protection,
information, compulsion). These are covered in detail in Davis(1995).