Wall Street's Stake in Pension Reform

David Stubbs and Teresa Ghilarducci

No 2011-9, SCEPA working paper series. from Schwartz Center for Economic Policy Analysis (SCEPA), The New School

Abstract: As this report was being prepared in the summer of 2011, America's institutional investors continued to face significant regulatory uncertainties as policy makers – including the National Commission on Fiscal Responsibility and Reform and Vice President Biden's Middle Class Task Force – struggled with the fact that a rapidly increasing number of Americans face retirement age with inadequate pensions. The asset management industry is divided among financial firms using a broad range of different business models, meaning that pension reform proposals will impact firms differently based on the shift in the type of retirement accounts and the level of the flow of funds into them. For example, a mandatory supplement to Social Security – the SCEPA/Economic Policy Institute (EPI) Guaranteed Retirement Account plan – will mainly benefit managers who now manage pooled retirement assets and charge wholesale or group-based fees. The New America Foundation Universal 401(k) plan and the Urban Institute's Super Simple Saving Plan on the other hand will direct more assets to 401(k) plans and IRA providers who manage self-directed worker plans on a retail basis. In this regard, the New Benefit Platform proposed by the ERISA Industry Committee (ERIC) would also promote individual-directed plans. This study is the first to examine exactly how major pension proposals will affect Wall Street firms. With retirement assets making up 21% of assets under management, the nation's financial industry would be greatly affected by any change in the system and the leading reform proposals for the U.S. employer-based pension system, analyzed here, will change the configuration of retirement products and management arrangements.

Keywords: retirement; pensions; wall street (search for similar items in EconPapers)
Pages: 25 pages
Date: 2011-07
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