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288201 6/14 Robert L. Reynolds President and CEO Putnam Investments and Great-West Financial The U.S. Retirement System: Challenges and Solutions The International Pension Conference of Montreal June 9, 2014

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2 288201 6/14 Over the past 50 years, U.S. legislation has created a host of tax-advantaged vehicles for retirement savings Source: ICI (excluding annuities, except those in other retirement plans). Selected major U.S. retirement legislation 1962Self-Employed Individuals Tax Retirement Act Keogh plans 1974The Employee Retirement Income Security Act (ERISA) IRAs 1978The Revenue Act of 1978 401(k) plans and SEPs 1997The Taxpayer Relief Act Roth IRA 2006Pension Protection Act (PPA) Auto-features and QDIAs in DC plans

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3 288201 6/14 creating a hybrid system that combines revenue from Social Security payroll taxes plus earnings from investments in workplace savings plans Sources: S&P 500 data from Yahoo Finance; and OASI and DI data from the Annual Statistical Supplement, 2013. Combined OASI and DI contributions vs. S&P 500 (19702014) ($ Millions) Index value

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4 288201 6/14 In private workplace savings, the rise of defined contribution plans has shifted responsibility from institutions to individuals Source: ICI (excluding annuities, except those in other retirement plans). Percent of retirement assets, 19752012

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5 288201 6/14 and with the passage of the Pension Protection Act of 2006, workplace plan design has come to the forefront Enabled auto-enrollment and savings escalation Endorsed defined lifecycle/balanced default options Provided legal safe harbor for employers Source: Profit Sharing/401k Council of America. Usage of key PPA-endorsed features

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6 288201 6/14 and will help total U.S. retirement assets grow from $19T to $25T by 2018 with IRAs and DC outpacing DB Sources: Department of Labor, ICI, U.S. Census Bureau, Federal Reserve, PBGC, EBRI, Cerulli Associates, Empirical Research Partners, Putnam Analysis. Private DC includes 401(k)s, money purchase plans, profit sharing plans, Keoghs, and Taft-Hartley DC plans. Public DC includes Federal Thrift Savings plans, 403(b) and 457 plans. U.S. retirement market assets ($B) 8.6% 5.4% 3.7% 4.0% 5.8% CAGR $10,041 $14,297 $18.9T $25.2T

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7 288201 6/14 Real solutions in workplace savings are right at hand Replacement percentages of pre-retirement income Sources: Putnams Lifetime Income Study, 2014; and U.S. Census data estimates (2012 Statistical Abstract, Table 690: Money Income of Households). Average household replacement score 61% No access to workplace plan Active in DC plan Automatically enrolled in plan Has auto escalation Deferring 10%+

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8 288201 6/14 What we believe The DC system will be the primary source of retirement income for most U.S. families We must also find ways to secure access to workplace savings for all Better outcomes can be achieved indeed, are being achieved through automatic plan design and income-oriented guidance for participants Apart from participation, the most powerful driver of success is raising savings rates to 10%+ of their earnings

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