Key dened contribution policy challenges disclosed by the2008–2009 market slump
High market volatility
Excessive risk in some lifecycle funds
Excessive or opaque DC fees
Need to shift focus from asset totals to lifetime income capacity
Need for innovation in lifetime income provision
New focus on “retirement readiness”
Some members o Congress, the media, and regulators zoned in hard on supposedlyhigh or hidden ees in workplace plans, and in some cases, they had a point. Otherpolicymakers, perhaps more thoughtul ones, called or a shit in ocus rom asset totalsand allocations to the potential lietime incomes, or monthly payouts, that DC planscould generate.There was a wave o interest and innovation in lietime income provisions. The Departmento Labor and the Treasury sent out a request or inormation and got over 800 replies.And “retirement readiness,” defned as bringing participants to the point where theycan successully retire and support their liestyles, became the new industry standard.It’s about time, i you ask me. I’ve always believed that the best test o any retirementsavings plan, solution, or system is how well it succeeds in replacing the income peoplemade while working and sustaining that income or lie.Some people in retirement services reacted deensively to these challenges. But denialwas not our approach at Putnam. It never will be. I believe deeply in the potential o theDC system. But I also believe that when experience discloses real aws, those o us whohave aith in DC’s potential should be the frst to respond to legitimate criticism and fndreal solutions. That’s what we have been doing at Putnam over the past two years. Hereare some examples.
Putnam’s response to volatility — the Absolute Return suite
As many o you know, we actually had a ull suite o Absolute Return unds in develop-ment just as securities markets were caving in 2008. We rolled them out in December othat year and took them public in the frst quarter o 2009. These unds aim to deliver1%, 3%, 5%, and 7% over T-bills, net o ees on a rolling three-year basis — no matter whatmarkets do.
I’ve always believed that thebest test o any retirement savings plan, solution, or system is how well it succeeds in replacing theincome people made whileworking and sustaining that income or lie.