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Performance of Personal Pension Funds in Portugal

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This paper analyses the performance of personal pension funds in Portugal, during the period from 1999 to 2016, providing the first detailed analysis of this matter. Three performance measures are used: the Sharpe ratio, the difference between the returns of the fund and its benchmark, and the M2 measure. The findings show that the performance of these funds is very low and that their returns are not significantly different from zero, which might be the result of government-imposed limits concerning asset allocation. Additionally, evidence was found confirming that these funds, on average, underperform their benchmarks. Tax gains seem to be the main reason why people decide to invest a portion of their wealth in these funds, rather than in other investment forms where there are no penalties in the case of early withdrawals.

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  1. The gross replacement rate is defined as gross pension entitlement divided by gross pre-retirement earnings (OECD 2017). It measures how effectively a pension system provides retirement income to replace earnings, the main source of income before retirement. This indicator is measured as a percentage of pre-retirement earnings by gender.

  2. Average life expectancy at birth for OECD members (World Bank 2015).


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The authors acknowledge financial Support from FCT - Fundação para a Ciência e Tecnologia (Portugal), national funding through research grant UIDB/05069/2020.

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Correspondence to Maria Teresa Medeiros Garcia.

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Garcia, M.T.M., Costa, B. Performance of Personal Pension Funds in Portugal. Int Adv Econ Res 26, 259–272 (2020).

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