Putnam CEO Calls for 2010 to Be the Year of Retirement Reform
BOSTON, MA, November 3, 2009 -- While 2009 has been the year of healthcare reform in Washington, Putnam Investments President and Chief Executive Officer Robert L. Reynolds today called for 2010 to be the year when major retirement reform is finally enacted to make possible a new generation of workplace savings plans that generate more dependable sources of lifetime income.
Reynolds said that, with reforms he is proposing, annuities and other non-annuity assured income products could play a greater role in generating retirement income, with the market for such products perhaps growing to more than $5.5 trillion by 2020, compared to today's fixed and variable annuity market, which is estimated to total about $1.7 trillion according to the Insured Retirement Institute.
"America faces a retirement challenge that encompasses federal entitlement reform, extending workplace savings coverage to the half of all Americans who have no such access today and taking our defined contribution system to the next level," Reynolds said at an industry conference in San Francisco. "Meeting this challenge, and revitalizing America's retirement savings system for the 21st century, is too big a job for any single firm or industry. We will need to forge new alliances among mutual fund companies, insurance companies, retirement plan sponsors and advisors and government itself."
A crucial part of the reform effort is helping to protect workers' savings as they reach retirement in order to allow for a dependable source of lifetime income. In addition to stock and bond mutual funds, asset allocation funds and absolute return strategies, Reynolds said that assured income options should become part of a "lifetime financial product allocation" glide path that adjusts throughout life to protect assets and ensure a dependable "retirement paycheck."
Reynolds added that reforms are needed to enable assured income products, including both annuities and non-annuity products such as guaranteed minimum withdrawal benefits and stand-alone lifetime benefits, to play a greater role in providing income throughout life. In order to build confidence in assured income options among workers and sponsors of 401k plans and other defined-contribution retirement plans, Reynolds called for reforms in Washington including:
- The creation of a national insurance charter, for nationwide consistency of regulation for assured income products;
- A new regulatory body empowered to approve assured income offerings, which he provisionally named the Lifetime Income Security Agency ("LISA");
- A national industry-funded, FDIC-like insurance pool to ensure that approved assured income solutions deliver on their promises to retirement plan participants;
- Requiring that all workplace savings plans offer plan participants the option of choosing annuity or non-annuity income solutions for a portion of their savings;
- Offering plan participants compelling tax incentives if they choose assured income streams.
"Assured income products could add a significant layer of security to future generations' lifelong income prospects," said Reynolds. "Admittedly, that vision is dependent on major reform in Washington – and that's precisely why I am calling for cross-industry collaboration and bipartisan action from Congress next year as we work to meet the nation's retirement savings challenge."
About Putnam Investments
Founded in 1937, Putnam Investments is a leading global money management firm with over 70 years of investment experience. As of September 30, 2009, Putnam had $114 billion in assets under management. Putnam has offices in Boston, London, Frankfurt, Amsterdam, Tokyo, Singapore, and Sydney. For more information, go to putnam.com.
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