How to Improve Retirement Outcomes with the Refundable Saver’s Credit

Smart Today Released a Special Report for Policymakers on How Modern Technology Could be Utilized to Implement the Refundable Saver’s Credit in a More Convenient and Cost-Efficient Manner for the Benefit of the US Government and the Recipient

NASHVILLE, TN / ACCESSWIRE / March 22, 2021 / Smart, a leading retirement technology business and one of the largest global recordkeepers, today released a special report for policymakers entitled “Improving Retirement Outcomes with the Refundable Saver’s Credit,” describing how to utilize modern technology to implement the refundable Saver’s Credit in a way that is convenient and low cost for both the government and the recipient and delivers better expected returns than an investment in treasury bonds.

The Saver’s Credit is a tax credit that currently reduces the tax liability for low and middle-income individuals who have made a contribution to a retirement plan. If the Saver’s Credit becomes refundable, the government would deposit the credit into a retirement saving account on behalf of the recipient. According to research by Georgetown University, a refundable Saver’s Credit that is invested in a retirement plan with market-based returns could increase the retirement income of recipients by as much as 50%.1However, it is important to note that the 50% increase in expected retirement income assumes that the Saver’s Credit contributions are invested in the same type of investments that are typically used in retirement plans, such as target date funds (“TDF”). The government’s own Thrift Savings Plan (“TSP”) also uses TDFs as a default. If instead the default investment for the government match is based on Treasury bonds, as has been proposed in some of the current bills, the improvement in retirement income would be less than half the amount that could be achieved by investing in TDF-like funds.

The special report proposes a model that allows the use of TDF-like investments as a default. In this model, the government could appoint private-sector providers to manage the program. Key features of the proposed model are:

  • Market-based returns double value of credit: The credits would be invested, on a default basis, in the same way as other retirement plan assets, providing market-based returns and stronger wealth accumulation than the extremely low returns from Treasury bonds. Of course, participants would be entitled to change their investments and/or move their savings to a plan or IRA of their choice.
  • Operational efficiency through modern technology: Through the use of modern technology, it would be possible to simplify the administrative process and lower the cost to the government by reducing the number of transactions and making the program self-sustaining.
  • Minimal costs: The cost of this proposal to the government would be minimal. The cost to savers would also be low, and any incremental cost compared to a Treasury account would be more than made up by the much higher expected returns compared to an investment in Treasury bonds.

“In many ways, this proposal is very similar to the Obama administration’s myRA program, except with far higher net returns to participants,” said Catherine Reilly, Director of Retirement Solutions at Smart. “The refundable Saver’s Credit is also a way to equalize the retirement saving incentives directed at low- and medium-income taxpayers compared with those on higher incomes.”

The white paper covers how market-based investments could double the value of Saver’s Credit and how the use of private sector technology could simplify the administrative process and lower the cost to the government, ultimately offering a collaborative approach to improve retirement equity.

Jodan Ledford, US CEO of Smart adds, “At Smart, we very much support the idea of the Saver’s Credit in principle but do feel that converting the program to a refundable proposition and facilitating a broader investment solution will be tremendously impactful for individuals. We believe that with technology, individuals taking advantage of the Saver’s Credit can realize the low-cost solutions afforded to large savings plans and ultimately over time meaningfully supplement their retirement savings.”

To view the white paper, click here. For more information on this paper or the work of Smart, please contact Catherine Reilly, Director of Retirement Solutions, at [email protected] or 857-389-9996.

About Smart
Smart USA Co is a Delaware corporation formed in 2020 and is a subsidiary of Smart Pension Ltd., a global savings and investments technology platform provider, co-founded in 2014 by Andrew Evans, Group CEO, and Will Wynne, Group MD. Legal & General Investment Management (LGIM), J.P. Morgan, Link Group, Natixis Investment Managers, and Barclays are all investors in Smart.

The Smart platform powers the award-winning master trust, Smart Pension Master Trust. Launched in 2015, the Smart Pension Master Trust has grown from £100 million in AUM to £1.3 billion in two years. It is overseen by independent professional trustees and regulated by The Pensions Regulator. Smart Pension is a signatory of the UN Principles of Responsible Investing (PRI).

In 2020 Smart Pension was named Master Trust Offering of the Year at the Pension Age Awards. Other awards include DC Master Trust of the Year, DC Innovation of the Year, and Retirement Innovation of the Year in the 2019 UK Pensions Awards. Smart Pension was also named European Pension Fund of the Year 2019 in the European Pension Awards.

Find out more about Smart:

We tweet as @SmartPensionUK

Media Contact:
Jacqueline Silva
Caliber Corporate Advisers for Smart
[email protected]

1“What are the Potential Benefits of Universal Access to Retirement Saving?” Center for Retirement Initiatives at Georgetown University, Policy Report 20-02 December 2020


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