– America 'is facing a pensions crisis'

Last updated on: November 7, 2005 at 8:33 am by Desh Kapoor

– America 'is facing a pensions crisis' 2005-11-07T08:33:43-06:00 Desh Kapoor

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With the deficits and the wars looming etc… here is a scenario that is pretty scary on the economy!

AMERICA is on the brink of a pensions crisis of “grotesque” proportions, in which 28 million households across the United States have no savings for retirement, the Prudential’s US arm has said.

The warning came as Britain’s second-largest listed insurer tried to convince investors of the rationale of keeping its American subsidiary, Jackson National Life (JNL).

Clark Manning, the JNL president and chief executive, said that a combination of under-saving, sharply rising healthcare costs and social security payments barely above the poverty line had created a generation of baby-boomers “grossly” unprepared for retirement.

He said that, as the owner of America’s sixth-largest financial adviser network, JNL was well placed to advise workers on how to rescue the situation, while its low expense ratio — 0.43 per cent, compared to an average 0.74 per cent for the top US insurers — meant that it could do so cost-effectively.

JNL’s chief executive was part of a team of Prudential bosses that gathered in Chicago last week for the first analyst visit to the group’s US operations in three years.

Mark Tucker, Prudential’s group chief executive, was determined to convince the City that JNL was not “sub-scale”, after he disappointed the stock market on October 26 with a new business strategy little changed from that of Jonathan Bloomer, who was ousted as chief executive in March.

Speculation that JNL is too small to succeed in the competitive US market has dogged the business since a failed attempt by Prudential to buy American General, an American insurer, for $20 billion in 2001. At the time, Mr Bloomer claimed that JNL needed the acquisition to give it scale, but it was outbid by AIG.

JNL is America’s second- largest seller of variable annuities, but is twelfth in total individual annuity sales and languishes outside the top five in most other industry rankings. Unlike the UK, where annuities are solely income-providers bought after retirement, US annuities are savings products used in pre-retirement.

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