From the October 2010 issue of Investment Advisor • Subscribe!

October 1, 2010

Retirement News and Products

Auto-IRA proposals are on the table, pension assets are expected to grow and a new firm steps up to the plate.

As Congress gears up to start its fall session, Putnam Investments is wasting little time in pressing lawmakers to pass auto-IRA legislation. Two bills that were introduced before Congress broke for its summer recess--H.R. 6099, the Automatic IRA Act of 2010, introduced by Richard Neal (D-Massachusetts) and S. 3760, the Automatic IRA Act of 2010, introduced by Jeff Bingaman (D-New Mexico) and co-sponsored by John Kerry (D-Massachusetts)--both require that companies with more than 10 workers automatically enroll their employees in a payroll-deduction IRA (known as auto-IRAs) if they are not already covered by an employer-sponsored retirement plan. Putnam says instituting an auto-IRA law would extend retirement savings coverage to the nearly half of all American workers who have no retirement savings plans through their jobs today. The Obama administration has called on Congress to enact an automatic IRA measure, and included a proposal in its FY 2011 budget.

Recent research by Allianz Life Insurance Company of North America says that despite the current financial turmoil, the global retirement market is expected to grow by 66% by 2020, an annual growth rate of 4.7%. The data, released by Allianz Demographic Pulse, also states that total pension assets during this time period will increase from $28 trillion to $46 trillion. The United States is the leading retirement market in the world, the Demographic Pulse states, covering slightly more than half of the world's total retirement assets of nearly $28 trillion in 2009. The United Kingdom followed the United States with 11.5% of the global retirement market, while Western Europe's combined retirement assets came to slightly more than 20%. Australia and Japan each had 3% of the global market, while the emerging economies of Asia and Central and Eastern Europe, which are still in the early stages of building up their individual funded pension systems, represented currently only minor shares (1.8% and 0.4%, respectively).

Hand Benefits & Trust Company (HB&T) has selected Blue Prairie Group LLC (BPG), an independent, fee-based retirement and investment consulting firm based in Chicago, and Target Date Solutions (TDS) as managers of the SMART Fund target-date collective investment trusts. David Hand, CEO of HB&T, says that the SMART Funds have been around for more than 10 years, but choosing BPG and TDS as co-managers is part of HB&T's goal to "position the funds for continued growth." The SMART Funds, HB&T says, are designed to end at the target-date in entirely safe asset classes, which differentiates them from most other target-date funds. The collective investment trust (CIT) structure and low cost underlying investments result in overall operating expenses that are dramatically lower than most other target-date strategies on the market, the firm says. The three firms will be hosting a free Webinar on October 27. Discussion topics will include SEC and DOL requirements, "to" versus "through" glide paths, open versus closed architecture, mutual fund versus collective trust, longevity risk, fees, and more. For more information about the free Webinar, log on to www.bpas.com or call 713-460-1000.

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