The pension industry should heed the lead of former Apple chief executive Steve Jobs and present products in a simple, bundled package, keeping the complexity on the inside, Todd Ruppert, president of T Rowe Price, told delegates at the European Policy Forum in early November.
“If the user interface works, keep the complexity on the inside of the package.”
For example, he says, target-date funds are preferable to target-risk-type funds as consumers only have to answer one question: “How old are you?”
“Most people don’t want to spend a lot of time thinking about investments; they want bundled solutions,” he says.
While Ruppert says innovation is needed in various parts of the industry, and there is not one product alone that will act as a panacea for three risks consumers face: longevity, inflation and market.
But he believes age-appropriate target-date retirement funds, with an appropriate glide path, are an “intelligent solution”.
He says between 2002 and 2010 in the US, the growth of target-risk products increased five-fold, but in that time target-date funds increased by 24 times.
This growth is due in part to the Pension Protection Act of 2006, which provided a safe harbour for providers of target-date funds, exempting them from fiduciary duty.
The forum, Finance Regulation and the Dynamics of Saving and Investment Markets, was attended by a who’s who of European financial regulators including Andrea Enria, chair of the European Banking Authority; Steven Maijoor, chair of the European Securities and Markets Authority; Gabriel Bernardino, chair of the European Insurance and Occupational Pensions Authority; Michel Barnier, European Commissioner for Internal Market and Services; Jean-Baptiste de Franssu, chief executive of INCIPIT; and David Wright, Deputy Director-General of the European Commission responsible for financial services.
Ruppert says public-private partnerships are essential for providing adequate retirement income, and that annual automatic deferral escalation combined with service, not just product, are key elements of providing for long-term savings.