The charge ratio on individual accounts and investment plans in Iceland

This paper documents the lifetime costs on individual accounts and investme nt plans for a typical worker in Iceland using typical wage profiles and in formation on current charges obtained from the providers. The charge ratios calculated imply that costs at a current cost basis on individual accounts are substantially lower in Iceland than for personal pensions in the UK an d retail charges for individual pension accounts in other countries. The Ic elandic charges are substantially lower than would ordinarily be expected i n an emerging defined contribution market and given the low contribution ra tes associated with the Icelandic accounts. These low charges are attribute d to a variety of factors including: low levels of regulation, competition for business between traditional financial institutions and workers' main p ension funds and the perception of a growing market.