Kathleen Kennedy Townsend, the former lieutenant governor of Maryland, has called on the pension industry for advice on how to design and run superannuation plans for the U.S.
“I ask for any of you during this conference to hear your advice: I need your advice, and I would love your advice,” Ms. Townsend told attendees at the Pensions & Investments' Investment Innovation and the Global Future of Retirement conference in New York on Monday.
Ms. Townsend, who is also founder of the Center for Retirement Initiatives at the McCourt School of Public Policy at Georgetown University, said 17 U.S. states are interested in setting up superannuation funds, up from just one state — California — six years ago. “This summer, six states, including Maryland, set up groups” to look at the proposals, she said.
Proposed legislation changes in several states would mandate that employers that do not offer defined benefit or defined contribution plans to employees pay 3% of employee salaries into a pooled fund that will be professionally managed. Management will “probably” fall to the treasurer of the state, or will be opened up to requests for proposals from money managers, Ms. Townsend said. “That is (what) we are trying to do at the state level and proposing that we pool these funds, which will reduce the risk, have lots of people in the funds and have professional management to look at a different range of asset classes, to invest in different asset classes, and do a better job in finding places to invest,” she added.
Ms. Townsend gets advice from an international advisory board, with representatives from Canada, the Netherlands, Australia and other countries, “who know much better than we do how to solve the problem.”
She said they are looking at contribution rates, how to communicate with employees and how to annuitize contributions. “I said we will make annuitization the new word that is popular in the U.S.,” Ms. Townsend said. “Americans don't like three words — retirement, elderly or planning — which makes this a very difficult effort. People are afraid of retirement, they feel guilty as they haven't planned, and (they) are more afraid of aging than of dying. We have to … tell them that they can easily save. The plans that these states are developing will make it easier and less expensive to save, and they don't have to make decisions about where to invest themselves.”