Human Resources: U.S. Retirement Assets Grew Substantially in Last 10 Years, But Face a Challenging 2008

WASHINGTON, D.C., March 27, 2008 — Although recent market downturns are
holding back asset growth, U.S. retirement plans have nearly doubled in
value since 1997, research by Watson Wyatt Worldwide, a leading global
consulting firm, has found.

The 2008 Global Pensions Asset Study found that assets in U.S. pension
funds, 401(k)s, individual retirement accounts and other retirement savings
vehicles have increased from $7.9 trillion in 1997 to $15 trillion in 2007.
As of the start of the year, these U.S. retirement assets were worth more
than the gross domestic product ($14 trillion) based on a compound annual
growth rate of 6.7 percent since 1997 compared with GDP growth of 4.8
percent during the same period.

“Retirement plans have built up strong reserves over the last 10 years,
benefiting employers, employees and retirees,” said Carl Hess, director of
Watson Wyatt’s investment consulting in North America. “Companies that have
taken steps to optimize returns or reduce risk through their investment
strategies, whether by hedging, diversification or better deals on fees,
are better positioned than those still thinking about it. The current
market will be challenging for many investors, and we can expect to see
declines in asset values over the next year if the market turmoil
continues.”

Growth rates for retirement assets began slowing worldwide in 2007. In the
11 countries with the largest workplace retirement systems, the estimated
growth rate for retirement assets was only 2 percent in 2007. This was a
significant drop from the 10.5 percent growth rate for the five-year period
ending in 2007 and from the 7.4 percent per annum growth of the last 10
years. U.S. short-term returns were better with retirement assets growing
8.3 percent in 2007 and 10.9 percent over five years. U.S. retirement
assets make up an estimated 60 percent of assets in the 11 countries,
although the U.S. share has been declining slowly.

In the United States, most retirement plan assets (59 percent) are invested
in equities, while less than a quarter (23 percent) are in bonds and 17
percent in alternative assets, which include hedge funds, private equity,
real estate, commodities and infrastructure. While the amount in equities
has remained relatively stable over the last 10 years, the portion in
alternatives has grown (from 9 percent in 1997) and the share in bonds has
declined (from 33 percent in 1997).

“The move to alternatives is helping pension plan sponsors get more out of
their assets while reducing overall risk,” said Mark Ruloff, director of
asset allocation at Watson Wyatt. “However, employers need to closely
monitor these investments through appropriate governance strategies. This
is crucial to ensuring that fees associated with these investments don’t
eat too deeply into returns.”

The makeup of U.S. retirement assets has changed considerably over the last
10 years. The share of assets in defined contribution plans, such as
401(k)s, and individual retirement accounts has increased, from 47 percent
to 56 percent with defined benefit assets diminishing accordingly.

The Global Pension Assets Study analyzes retirement assets in the United
States, Australia, Canada, France, Germany, Hong Kong, Ireland, Japan,
Netherlands, Switzerland and the United Kingdom. More information about the
study can be found at http://www.watsonwyatt.com/globalpensionassets.

About Watson Wyatt Investment Consulting

Watson Wyatt Investment Consulting, a division of Watson Wyatt, is focused
on creating financial value for institutional investors through
independent, best-in-class investment advice. We are specialist investment
professionals who provide coordinated investment strategy advice based on
expertise in risk assessment, strategic asset allocation, and investment
manager selection. Watson Wyatt Investment Consulting provides investment
advice to some of the world’s largest pension funds and institutional
investors, and has more than 450 associates in Europe, the Americas and
Asia.

In the United States, investment advisory and investment consulting
services are provided by Watson Wyatt Investment Consulting, Inc., which is
a subsidiary of Watson Wyatt Worldwide Inc. Watson Wyatt Investment
Consulting, Inc., is a registered investment adviser with the Securities
and Exchange Commission.

About Watson Wyatt

Watson Wyatt (NYSE, NASDAQ: WW) is the trusted business partner to the
world’s leading organizations on people and financial issues. The firm’s
global services include: managing the cost and effectiveness of employee
benefit programs; developing attraction, retention and reward strategies;
advising pension plan sponsors and other institutions on optimal investment
strategies; providing strategic and financial advice to insurance and
financial services companies; and delivering related technology,
outsourcing and data services. Watson Wyatt has 7,000 associates in 32
countries and is located on the Web at www.watsonwyatt.com.