Putnam Investments announced Tuesday that it will incorporate into its 401(k) plan record-keeping platform information that will allow individual participants to compare their savings rates and balances with those of their peers.
“The catalyst is to get more people to save for retirement,” said Edmund Murphy III, head of defined contribution at Putnam. “Some employees are motivated by social comparison.”
Putnam plans to unveil its “How Do I Compare” feature in April to its clients as part of its lifetime income analysis tool that it has provided to plan participants since January 2010. There is no extra cost for the comparison feature. Putnam's record-keeping business serves 360 DC plans with a total of $17 billion in assets and 250,000 participants.
“I'm not aware of anyone else doing participant-peer level comparisons, certainly not at the participant display level,” said Nevin Adams, director of education and external relations at the Employee Benefit Research Institute, in an interview.
Putnam's comparison tool allows participants to compare themselves to peers based on salary, gender and age. The Internet-based tool enables participants to examine how making changes in their contribution rate would bring them closer to — or ahead of — their peers.
Mr. Murphy said Putnam developed this tool over four months asking about 100 plan executives, consultants, advisers and participants whether the product is easy to understand and would motivate participants to take action.
Mr. Murphy said Putnam created the tool after having heard frequent comments from plan executives and advisers who reported that participants were asking them whether their savings rates and account balances were good or bad.
“Some people may not need social comparison,” Mr. Murphy said. “Some will use it for motivation. The goal is to reach more participants.”