Putnam CEO Reynolds Calls for 2010 to Be the Year of Retirement Reform, with a "New Generation" of Workplace Savings Plans

November 3, 2009 1:46 PM EST

Reynolds Sees Growing Role for Annuities and Other Assured Income Products, With a $5.5 Trillion Market by 2020

BOSTON--(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(R) 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.

    Source: Putnam Investments

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