Putnam CEO Reynolds Calls for 2010 to Be the Year of Retirement Reform, with a “New Generation” of Workplace Savings Plans
03 November 2009 - 7:46PM
Business Wire
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 401(k) 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.”
Leadership in Retirement Product Innovation
Putnam recently announced that its RetirementReady® Funds are
the industry’s first suite of target date funds that integrate
target absolute return strategies with traditional relative return
mutual funds. The enhancement is designed to lower volatility
during accumulation and to pursue a higher level of income for
investors in retirement. The suite of 10 dynamically managed funds,
each of which has a target date based on when investors expect to
begin withdrawing assets, will seek to better shield investors
close to or in retirement from market extremes, thereby creating a
more stable sequencing of investment returns. The funds strive to
do this without sacrificing the potential for gains in more
positive markets.
The first use of absolute return strategies in target date funds
is just the most recent step in Putnam’s commitment to the
retirement market. Earlier this year, Putnam launched a new
401(k)/defined-contribution platform for advisors and their plan
sponsor clients that provides them with highly flexible and
scalable services and solutions.
The application of absolute return strategies to lifecycle
investing exemplifies Putnam’s renewed leadership in product
innovation. During the past year, Putnam launched the industry’s
first suite of target Absolute Return Funds, which already have
attracted nearly $800 million in investments;* Spectrum Funds,
which invest in the securities of undervalued, leveraged companies;
and Global Sector Funds, which target stocks in dynamic sectors
across global markets.
NOTE: For more information on Putnam CEO Robert Reynolds’
address to the Pensions and Investments 12th Annual Defined
Contribution Conference, please visit
www.theretirementsavingschallenge.com.
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.
Putnam’s target Absolute Return Funds are not intended to
outperform stocks and bonds during strong market rallies.
Putnam mutual funds are distributed by Putnam Retail
Management.
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