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Putnam Investments to Dramatically Strengthen Companies’ Awareness of Employees’ Readiness for Retirement

In a move designed to better enable retirement plan sponsors to exercise their fiduciary responsibility in helping employees attain more successful financial outcomes in retirement, Putnam Investments today announced that its proprietary Lifetime Income Score SM will be made available more broadly to the defined contribution marketplace.

Building off of the ability of Putnam plan participants to view their highly customized Lifetime Income Score – measuring their individual retirement income replacement trajectories – Putnam will now be providing employers with a uniquely dynamic view of how well their plan is working in the aggregate, as well as specific areas of focus to lead to greater plan success.

Using its Lifetime Income Score analytics, Putnam will be offering critical plan-level perspective and useful drill-down insight to 401(k) plan sponsors, which can enable them to take a series of actions to help positively influence the retirement preparedness of their workers. Plan sponsors and their advisors will have the ability to review participant readiness by demographic groups to pinpoint those most at risk, develop targeted and measurable campaigns to educate and engage least prepared employees, showcase income calculations at the forefront of participant communications and introduce tools to help participants calculate income goals and gaps – and measure usage.

“There is a rising expectation in the marketplace that plan sponsors will take a greater role in helping their participants adequately prepare for retirement,” said Edmund F. Murphy, III, Head of Defined Contribution, Putnam Investments. “To do that, they need to know whether their employees are on track, from a future income perspective, to enjoy a dignified retirement, and how well their plans are working in readying their workers for retirement.”

The Putnam Lifetime Income Score plan-level results will be available to 401(k) plan sponsor clients of Putnam and their advisors on an ongoing, real-time basis. All qualified plan sponsors – and their consultants – regardless of their client status, are eligible to receive a complimentary overview assessment if requested.

“The name of the game is empowering plan sponsors to focus on ‘guided outcome’ for their participants,” Murphy noted. “The Putnam Lifetime Income Score was designed in large part to address concern among plan sponsors about their workers’ readiness for retirement. Employers will now have an entirely new level of analytics and comprehensive reporting to allow them to benchmark and track their progress, and to ultimately serve as a basis for taking confident action in strengthening their plans.”

According to a recent study,* 62 percent of sponsors said that their responsibility includes seeing whether their employees are on course for a comfortable retirement. However, just 18 percent of sponsors have conducted a retirement readiness assessment during the past year. Sponsors feel responsible for ensuring their workers are on track for a secure retirement, but may lack the tools to assess that progress.

Focus on Retirement Income

Murphy explained that the Putnam Lifetime Income Score approach also addresses a significant shortcoming in financial planning by focusing on monthly income in retirement, rather than on undefined retirement savings balances that often leave individuals in need of broader context and application. “Our Lifetime Income Score re-focuses attention where it belongs: Expected income in retirement,” he said.

The Putnam Lifetime Income Score takes a holistic view of behavioral tendencies, demographic and mortality factors, current household income, savings and future contributions from a plan participant’s age today through age 65. The Putnam-developed methodology translates current assets, asset allocation mix, future saving deferrals, company match and Social Security, into estimated monthly retirement income, reflected in an easy-to-understand Lifetime Income Score that helps plan participants know where they stand on retirement readiness.

“The new offering to plan sponsors will allow Putnam Lifetime Income Score figures to be rolled up in a meaningful way to allow for targeted guidance and communication to bolster preparedness in areas of need within a participant base,” Murphy indicated.

America’s Lifetime Income Score

In June 2011, Putnam used the Lifetime Income Score methodology to analyze information provided in a survey of nearly 3,300 working Americans** to determine their current retirement preparedness. The study identified three key variables that drive successful retirement preparation: disciplined, long-term savings and investing (regardless of income level), access to a workplace savings plan and seeking the assistance of a financial advisor.

The research, believed to be one of the most comprehensive such studies ever conducted, found that American households are on track to replace an average of 64 percent of their current income in retirement. Many financial professionals recommend that workers seek to replace 75 percent of their current income once they retire.

“Clearly there remains a lot of work to be done to help get individuals on a more solid track to replace their current income in retirement,” said Murphy. “We believe that by providing action-oriented tools, resources and information to the retirement savings community, significant inroads can be made to close the existing gap and deliver much stronger outcomes for working Americans.”

Putnam Investments and Retirement

Since Robert L. Reynolds, a 30–year retirement savings industry veteran, became Putnam’s President and CEO in 2008, the company has deepened its commitment to the retirement market and launched a series of innovations and initiatives to meet emerging customer needs. In recognition of its leadership in retirement savings, Putnam was named the inaugural recipient of the “Retirement Leader of the Year” award at the 2011 annual Mutual Fund Industry Awards.

In addition to such initiatives as the Putnam Lifetime Income Score SM methodology, Putnam will also be officially launching a suite of income–oriented mutual funds that aim to help advisors work with retirees in developing strategies for monthly income flows, at varying levels of risk tolerance, to flexibly address their changing lifestyle financial needs throughout retirement.

The Putnam RetirementReady® Funds, the firm’s suite of 10 target–date/lifecycle retirement funds, were the first suite of lifecycle funds to integrate Putnam Absolute Return Funds, which seek positive returns above inflation over three years with reduced volatility than has been associated with traditional asset classes that have earned similar rates of return. Employed in retirement portfolios, Putnam Absolute Return Funds*** are intended to pursue positive returns in up and down markets, to help protect against the harmful effects of adverse investment returns and to seek to reduce volatility.

About Putnam Investments

Founded in 1937, Putnam Investments is a leading global money management firm with over 70 years of investment experience. At the end of August 2011, Putnam had $122 billion in assets under management, including mutual fund assets of $62 billion and institutional assets of $60 billion. Putnam has offices in Boston, London, Frankfurt, Amsterdam, Tokyo, Singapore and Sydney. For more information, visit putnam.com.

* Source: Deloitte Annual 401(k) Survey Retirement Readiness, 2010.

** The Putnam Lifetime Income Survey, with research methodology provided by the Putnam Institute, was conducted online by Brightwork Partners and completed in the first quarter of 2011. The survey of 3,290 working adults age 18 to 65 was weighted to U.S. Census parameters for all working adults.

*** Putnam’s Absolute Return Funds are not intended to outperform stocks and bonds during strong market rallies.

Contacts:

Putnam Investments Media Contacts:
Jon Goldstein, 617-760-1127 (office)
516-946-5598 (cell)
jon_goldstein@putnam.com
or
Laura McNamara, 617-760-1108 (office)
617-850-2727 (cell)
laura_mcnamara@putnam.com
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