Pension Breakthrough for the Rest of Us

Four out of five taxpayers will take this article seriously. The fifth has a public sector pension.

TORONTO, Dec. 1, 2011 /CNW/ - Saving more, spending less and retiring later are unsatisfactory alternatives to the inadequate pension awaiting many of the 80% of Canadians who are not members of a public sector pension plan. A Canadian paper released in the Rotman International Journal of Pension Management, by PŮR Investing Inc. of Toronto , presents a strategic breakthrough with positive implications for millions of people in retirement savings plans around the world. . "What DC Plan Members Really Want" offers strategies making retirement investing easier, more effective and more personalized than anything currently available in the defined contribution (DC) pension universe. In Canada, RRSP investors, DC plan participants and those considering the proposed Pooled Registered Pension Plan (PRPP) programme can benefit.

"We believe most people would welcome a reliable income in retirement similar to what a civil servant's defined benefit pension provides" said Mark Yamada, President and CEO of PŮR Investing Inc., the paper's co-author. "Obviously individuals and their employers have to fund the plan rather than taxpayers, and there aren't any guarantees. However, simply targeting a level of replacement income and having professionals managing their investments would be welcomed by many who are currently required to do it themselves. Gold-plated government plans pay annual retirement benefits equal to about 70% of an employee's average best three or five years of employment income. Taxpayers deserve the opportunity to work towards an equivalent level of post employment income."  This is timely because "DC plans and RRSPs cannot realistically deliver even half the retirement income that DB plans can provide" according to an October 2011 CD Howe Institute report.

"We started with the target date or lifecycle fund and developed strategies to make it better. These funds automatically become more conservative as retirement approaches, making them an easy one-decision choice for investors," said Ioulia Tretiakova, Director of Quantitative Strategies for PŮR, and lead author. "However, they all fall short in dealing with market risk and personal goals."

Frequency of delivering a 70% public-sector-like replacement income in historical testing:

All bonds (Barclays Aggregate Index)        0%
Balanced fund (60% S&P 500: 40% Barclay's Aggregate Index)          37%
Target date fund FIXED EQUITY GLIDEPATH (Fidelity, Vanguard, T .Rowe Price)  52%
All stocks (S&P 500)          80%
Target date fund DYNAMIC (PŮR Investing Inc.)       97%

Forty years of 9% annual contributions, using historical returns, replacing 70% of income for a minimum of 20 years in retirement. See paper for all assumptions.

Improving investment outcomes within the simplicity of a single investment choice would be a boon for those saving for retirement. However, through technology, a personal target date fund for each plan member is possible, making the approach suitable not only for group and individual retirement plans but also for the modern worker who is likely to move through a series of jobs and employers before retiring.

The Rotman International Centre for Pension Management (ICPM) publishes the Rotman International Journal of Pension Management in partnership with Rotman School of Management and the University of Toronto Press twice a year. We encourage open sharing of the articles in the Journal. There is no fee to access or distribute this information.

PŮR Investing Inc. engineers disruptive investing and retirement strategies for Gen X/Gen Y/Gen F and mass affluent investors. PŮR leverages new technologies to use investment products more effectively at lower cost. We empower the individual investor.

Additional web links:

Video with caption: "Video: PUR Investing Pension Breakthrough". Video available at:

SOURCE PUR Investing Inc.

For further information:

Mark S. Yamada, President & CEO, PŮR Investing Inc. 416.637.3576

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