The US has introduced a range of supplementary retirement vehicles offering tax deferred saving for retirement. The systems cover second and third pillar plans. In the second, the main plan forms are the 401(k) and the 403(b) plans, with assets together of $800bn at the end of 1995. Both are employer-sponsored vehicles into which the employee can contribute tax free payments. Choice of assets to be invested is typically left to the discretion of the participant, with a range of choices provided by the sponsor.
The third pillar is covered by the Individual Retirement Account (IRA), with assets of $1.2 trillion at end 1995. As a pure individual retirement vehicle, an IRA may beset up by all wage earners under the age of 70.5 years. Up to $2,000 per year can be contributed and earnings tax deferred until withdrawal.
In both plans forms, mutual funds account for a large and growing market share. At the end of 1994, mutual funds accounted for 31% of the 401(k) and 34% of the 403(b) market, up from 21 and 30% respectively one year earlier. In the IRA market the success has even been more pronounced with mutual funds accounting for 38% of the IRA market.