Most retirement benefits for American workers are built up through workplace savings plans where employers play a pivotal administrative and legal role as the plan sponsor. The Accidental Plan Sponsor®, hosted by Josh Cohen, Head of Client Solutions for PGIM DC Solutions, explores the origins, evolution and trends within the employer-based retirement system and examines other ways, both domestically and globally, that benefits can be delivered.
Season 2 Episode 1: The Chicago Boys and the Chilean Model
Our tour around the globe starts in South America. Chile has been seen in retirement circles as an early pioneer in reforming their retirement system in the late 1970’s. While studied and admired by many, there are many more layers to the story when viewed from historical and current events.
Host Josh Cohen talks to two individuals who have played a meaningful role in shaping the system. University of Chicago educated Martin Costabal led efforts in the Chilean government to implement the new system in the midst of the Cold War. Cristian Rodriguez has led the largest retirement plan provider in the country, and is making the case for the systems long term survival.
Travel with us to Chile to hear about their unique history and hopefully learn from their creative retirement solutions.
[:21] Josh Cohen, your host, states the main objective of Season 2: to explore how other countries around the world organized their retirement systems to accommodate a work force that is living longer and working much differently than what the previous generation did.
[3:50] Other countries looked up to Chile since they had updated and reformed their retirement system and it used to be viewed as a success. Josh talks about the wider political circumstances in Chile.
[5:03] Josh begins to explore the current state of the Chilean system by starting with its beginnings; that is why he talks with Martin Costabal who participated in its creation within the Chilean government.
[6:21] Martin shares how he got an offer from the University of Chicago that changed his life; he explains his personal and professional reasons for moving to the United States.
[10:30] General Augusto Pinochet Ugarte was self-declared president in Chile after a coup, while Martin was studying abroad.
[11:13] In August, 1974, Martin acquired an MBA from the University of Chicago and goes back to Chile to work in the Ministry of Economics with the purpose of instituting policies to reprivatize many industries and battling out of control inflation. He found that an economic blueprint called “The Brick” was already in place with those same goals.
[16:17] Martin focused on creating a new retirement system for Chile along with a group of 20 people, based on some foundations from “The Brick.”
[19:20] Cristian Rodriguez, Chairman of the Board of AFP Habitat, speaks about the organization and its role in managing pensions. Cristian has been working with Habitat for the past 23 years in several positions, he gives an overview of its evolution over the years.
[22:04] The Chilean retirement system lays on three pillars: 1. The government-backed foundational pillar (The solidarity pillar), 2. The employment based pillar (The contribution pillar), and 3. A voluntary saving system (similar to the IRA in the USA). Cristian talks about the pros and cons of each.
[34:47] One challenge for the system in Chile is that not all workers save the same. That is why there is a need to modernize the first pillar to include the informal and independent kinds of work that are becoming more and more prevalent worldwide. People also need to achieve a better understanding of the retirement system and the outcomes they will be generating.
[38:20] Josh talks about four main factors of any retirement system: Access, Adequacy, Alignment of Interest, and Innovation. He also shares his insights in regards to the Chilean retirement system.
Season 2 Episode 2: The Down Under Edition
Here’s what you need to know about Australia’s Retirement System: It’s really big. It’s government mandated. It’s privately run. It’s really sophisticated.
Still curious? Host Josh Cohen’s two guests have played meaningful roles in the system’s development from the highest levels of government and industry. The Honorable Nick Sherry started one of the first modern Superannuation Funds in Australia and then went to be the leading minister in the government overseeing the industry. Ian Silk ran the largest Super Fund called Australian Super. There’s a lot we can learn from their experiences.
[:19] Josh Cohen, your host, introduces today’s topic: Australia and their compulsory retirement system with very sophisticated investments that cause admiration worldwide.
[2:30] Josh is accompanied by two experts to dive deep into the origin and evolution of the Australian retirement system.
[2:55] Nick Sherry joins the conversation. He is a former Australian politician who served as a member of the Australian Senate for the state of Tasmania from 1990 until 2012, Sherry was sworn in as the Assistant Treasurer in 2009, after serving as the first Australian Minister for Superannuation and Corporate Law.
[4:39] Nick shares how he accidentally got involved in the retirement space.
[5:45] Nick explains how Australia began to shape a new retirement policy.
[6:40] Josh describes how the industrial awards system work along with the social wage.
[7:56] Nick shares the development of the House Plus Fund.
[9:10] Nick explains the administrative hassles they had to overcome in the late 80s’.
[10:09] Nick becomes in charge of an additional pension reform when he just assumed the role as a Senate for the state of Tasmania.
[12:32] Nick talks about initiating the Cooper review.
[13:25] What happens at retirement?
[14:01] Nick speaks about his life now that he is retired but still very active!
[14:38] Josh explains what fund mergers are about.
[15: 23] Ian Silk, Chief Executive at AustralianSuper, joins the conversation by providing answers about how Fund mergers work in Australia.
[16:47] Ian talks about his vast experience in the field of funds.
[17:18] Ian dives deep into the five sectors the retirement providers fall into.
[18:30] Ian describes two reasons why the owners have decided not to run their own plans.
[20:05] Compulsion arrived to change how things were doing in regards to retirement.
[20:34] An important feature of the Australian retirement system: An employer can run his/her own plan or pick a super plan as the default for his/her workers. There is always a default investment option if the employer doesn’t make an election.
[21:28] Josh talks about Industry funds that arise in the late 1980s and Ian expands on the topic.
[23:39] Josh introduces the fourth sector: The retail sector.
[25:32] Ian explains how people took their funds from retail to industry.
[25:43] The fifth sector is called the Self Managed Super, where people decide to run their own Super. Ian describes the one big driver of its popularity.
[26:58] Ian explains how Australian Super originated and how it scaled.
[28:49] The area of investing innovation is the one that is admired by many in Australian
Super. Ian describes this particular feature of the Australian Super.
[30:02] Ian shares what improvements could be done to an already sophisticated Australian retirement system.
[31:03] Ian talks about the secret to the success of the Australian retirement system.
[32:11] Ian shares the proudest moment of his career, realizing that low to middle-income workers in Australia have something significant to look forward to in retirement that wasn’t the case 30 to 40 years ago.
[33:23] Josh shares his key takeaways from the amazing conversations with Nick Sherry and Ian Silk.
Season 2 Episode 3: Building A Nest In The UK
Often retirement policies in a country are a result of a patchwork of initiatives over time. Wouldn’t it be nice if a country could take more of a blank slate approach?
In this episode, Josh Cohen interviews Helen Dean, CEO of the National Employees Savings Trust, or NEST, which is the largest pension scheme in the United Kingdom based on the number of members. Helen has played a central role over the last two decades in government, and now at NEST, developing and implementing a new retirement approach for the UK. Learn how they borrowed a lot of great ideas from other countries, including the US, to craft a system that may just be a model for other countries in the future.
[:15] Josh Cohen, your host, introduces today’s topic: The evolution of the UK’s retirement system or what Helen Dean likes to call “The biggest social experiment ever”.
[3:18] Helen shares her professional journey which started with her getting a degree in psychology and social policy, and involved working for the DWP
[6:39] The UK did something unique: They created a pension committee with three individuals: a business leader, a trade union leader, and a leading academic.
[8:51] How do you get individuals to save more? Education and advice didn’t get people to save more.
[11:31] Helen shares what her team and she proposed (which was very different from what they saw in the US model), they wanted to require automatic enrolment for all workers.
[19:00] Helen shares how the employer community got on board with NEST, after seeing the benefits for the UK and for their own businesses.
[22:28] Helen shares how they turned again to the US to adopt their ideas for emergency savings.
[23:56] Helen talks about how NEST manages investments for controlling risks and optimizing returns.
[25:18] NEST started to invest in liquid and private assets, high-quality sustainable businesses that assure a good return over the long term.
[28:43] Helen openly shares her thoughts and feelings about her past two decades dedicated to building NEST from scratch, seeing it grow, and witnessing the amazing impact it has had so far.
[31:29] Stay tuned for the next episode where Josh will take the audience to Singapore.
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The Accidental Plan Sponsor
Listen to Season 1 Episode 5: How Target Date Funds and Behavioral Economics Shaped Retirement Plans
Mentioned in this episode:
More about Helen Dean
Season 2 Episode 4: Singapore’s All-in-One System
Most retirement systems across the globe have three pillars: a government run social security system, an employment-based retirement system, and, finally, additional individual retirement savings.
On the fourth stop of our global tour, we travel to a country where the government runs the whole thing…Singapore! Their comprehensive system goes beyond retirement and is run by the government through the Central Provident Fund (CPF).
In this episode, Josh Cohen interviews Desmond Chew, a senior manager at CPF, to help explain its history and how it works, and Joe Cherian, a professor who lays out a methodology which helps evaluate both Singapore’s system and others around the globe. Join us to hear about this all-in-one approach!
[:25] Josh Cohen, your host, introduces today’s topic: Singapore, whose government runs the whole retirement plan, and in fact, reaches well beyond retirement.
[2:25] Singapore established a mandatory retirement system called the Central Provident Fund (CPF) the basis of the system played today.
[2:50] Mr. Desmond Chew (Group Director- Housing) has served in the CPF for more than 20 years. Desmond explains what exactly CPF is and what is its role.
[7:51] CPF supports other goals apart from retirement, Dr. Chew speaks about the importance of public housing.
[10:52] MediSave are contributions that increase as workers age and its purpose is to be destined for medical expenses. Desmond shares the most important aspect.
[13:08] Josh and Desmond dive deep into how the money is invested and the role the GIC plays.
[15:25] Desmond talks about the case of those individuals who are ready to take more risks with their savings.
[16:45] The system balances individual choice with collective responsibility, Dr. Chew explains how.
[20:02] Joseph (Joe) Cherian (Professor of Finance at NUS Business School) shares his background and career journey.
[22:10] Joe talks about what happened in 2014, a conflictive time for Singapore’s retirement system.
[22:54] Joe wrote an article named: Seven Pillars of a Good Retirement System, stating why CPF meets most of these pillars and the possible areas for improvement.
[30:06] Can the US or other countries adopt a system like this? Joe thinks it's difficult to emulate the historical and governmental influence, so he does not recommend it unless the country has a good and solid government.
[33:06] Stayed tuned for the bonus episodes!
Thank you for tuning in. If you liked what you heard, please subscribe and leave us a review wherever you listen to your podcasts.
Season 2 Trailer
Season 2 is almost here! We will be taking this podcast global, learning the unique challenges, historical events, and creative solutions developed to meet the ever-evolving challenges associated with retirement systems.
Bonus: Global Episodes Recap with John Mitchem
John Mitchem, global financial consultant and retirement expert, joins Josh to discuss episodes from the first half of season 2 while weaving in his experiences and expertise.
If you want to understand the history of our retirement system, current state and challenges, and what it might look like in the future, take a listen!