BlackRock’s annuity product just got a lot more popular.
The New York-based investment management company announced that five plan sponsors, representing $7.5 billion in target date investments, are electing to use BlackRock’s annuity product as their default investment option in company retirement plans.
BlackRock is anticipating a 2022 adoption by the plans of its LifePath Paycheck, which will affect 120,000 U.S.-based 401k plan participants, including those in the Tennessee Valley Authority Retirement System. The announcement comes on the heels of its earlier survey that showed almost nine in 10 plan participants said having guaranteed income in retirement would have a positive impact on their financial well-being.
“As Americans are living longer and healthier lives, their risk of outliving their savings is accelerating the ‘silent crisis’ of financial insecurity in retirement. By addressing spending and income in retirement, we’re working alongside our clients and partners to help more people address these challenges,” said Mark McCombe, Chief Client Officer, BlackRock.
The annuity path has become a popular option as Americans with access to a 401k plan are uncertain about managing their savings once they enter retirement–and a guaranteed income stream is something more plan sponsors and participants are aware of and increasingly demanding.
BlackRock’s LifePath Paycheck embeds annuity contracts issued by Equitable and Brighthouse Financial directly into a target date strategy. After a participant reaches age 59 ½, the annuity offers the participant the option to purchase fixed individual retirement annuities from the insurers, that will provide a guaranteed stream of income for life.
Recordkeepers are also cheering BlackRock’s emergence in the annuity market.
Voya’s Senior Vice President of Retirement Product Management, Jeff Cimini, says he’s seen demand for retirement income solutions “building for some time” and their research echoes other industry reports.
“(We) found 90% of individuals think having a guaranteed source of income in retirement so they don’t outlive their savings is important or extremely important.”
Since pioneering the first target date fund in 1993, BlackRock has a history of collaborating with other financial services firms to address rising retirement issues–and it’s an approach that is not going away according to Anne Ackerley, BlackRock’s Retirement Group Head.
“As we look past the pandemic, with all eyes on recovery, it’s time for the entire retirement ecosystem to come together and address how we can build a more financially secure American workforce for the future.”
Lynn Brackpool Giles is a contributing editor to 401(k) Specialist. Giles is a former Managing Director of Communications and Consumer Services for the Financial Planning Association (FPA), where she oversaw all corporate, legislative, and consumer communications. In her current journalistic practice, she is a frequent contributor to numerous financial services industry publications.
