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Putnam CEO: Industry alliance needed to advance retirement reforms

For the defined-contribution-plan system to meet the goal of delivering lifetime income to retirees, an industrywide alliance will need to be established, Putnam Investments president and chief executive Robert Reynolds said today.

For the defined-contribution-plan system to meet the goal of delivering lifetime income to retirees, an industrywide alliance will need to be established, Putnam Investments president and chief executive Robert Reynolds said today.

“We need a national alliance and collaboration of asset managers, insurance companies and others across the financial industry in developing a strong national retirement system policy,” he said at a regional conference of the National Investment Company Service Association in Boston.

“Everyone is working their channel. This is going to be solved by exploring solutions across the financial industry and working together.”

Mr. Reynolds, who has been an advocate for change in the 401(k) system, he concedes that Congress is not likely to focus on retirement issues until 2010 because it needs to finish working on health care reform.

Still, he plans to take an “active” role in establishing this industry alliance to help advance the discussion in Washington, he said.
Products and strategies to help individuals accumulate assets for their retirement are adequate, but systems that allow for maximum distribution of assets during retirement must be improved, he said.

Making automatic IRA enrollment and other automatic savings features mandatory will probably be the first reform to be finalized next year, he said.

Mr. Reynolds called for defined-contribution plans to include both annuity and non-annuity solutions to protect against longevity risk

Plans should also include relative-return strategies to protect against inflation and absolute-return strategies to protect against inflation and volatility, he said.

Many of the strategies being developed by the industry today are allowable under current regulations, he said.

But to expand these concepts, more safe-harbor legislation will be needed.

“I think all of these things need the blessing of government to ensure that the plan sponsor has the legal protection against future litigation,” Mr. Reynolds said.