Three heavyweights in the in-plan income space have teamed together to announce a new lifetime income target-date series.
The NCIT American Funds Lifetime Income Builder Target Date Series from Nationwide, Capital Group, and Annexus Retirement Solutions incorporates Lifetime Income Builder, a fixed indexed annuity with a guaranteed lifetime withdrawal benefit invented by Annexus.
The companies said it adds Nationwide’s suite of in-plan guarantees and will be available in the TDF Series as an investment option in defined contribution plans. It’s designed “to help participants optimize growth potential, and when the time comes, generate guaranteed income that will last a lifetime.”
“The industry itself has not truly tried to solve the problem of including lifetime guarantees in retirement plans,” Dave Paulsen, chief distribution officer for Annexus Retirement Solutions, said. “Things typically start institutionally and move down to the retail level. With lifetime income in DC plans, the industry took successful products in the retail space sold to individuals and applied them to a group asset management platform. So, it went in in reverse—from retail to institutional—and didn’t work.”
The “A” word (annuity), extra fees, and a general lack of how the products work led to decision paralysis, Paulsen noted. Routine decisions, therefore, should be taken out of the individual’s hands, something target-date funds have successfully done through professional asset management and glidepaths that feel customized.
“Getting people into target-date funds that mitigate risk over time is really good and gets you to age 65. But that’s why we need the ‘through’ portion.”
Charles Millard
“They’ve fallen short in that they get you to, but not through, retirement,” he explained. “The only true ‘through’ retirement is a guarantee. Opportunites included in the SECURE Act now make this more possible.”
It’s what they’ve added to the TDF Series, which is financially engineered to deliver a total income of 6% at the projected retirement start date. It leverages several of American Funds’ proprietary funds, investment management, and 90-year history. The underlying mutual funds are actively managed for growth and/or income opportunity.
“Getting people into target-date funds that mitigate risk over time is really good and gets you to age 65,” Charles Millard, Senior Advisor with Annexus Retirement Solutions, added. “But that’s why we need the through portion. Also, decision paralysis about choosing a guaranteed product applies not only to participants, but plan sponsors and advisors because their heads are spinning about advising clients. If you can check the necessary boxes and not have to give up liquidity, growth, efficiency, and portability, and can make it simple for them, then you’ve cracked the code, which is what we’ve done.”
The TDF Series is structured as a Collective Investment Trust and includes Lifetime Income Builder, a group fixed indexed annuity (FIA) with a guaranteed lifetime withdrawal benefit (GLWB). For plan sponsors, it provides a QDIA-compliant structure and a combination of liquidity, portability, and ease of use that the companies say has been largely missing from previous in-plan income solutions.
“Our product development philosophy is centered on the participant, and this latest offering rounds out our suite of in-plan guarantee solutions, which are all designed to help generate lifetime income,” Eric Stevenson, president of Nationwide Retirement Solutions, concluded. “Our partnership with industry leaders Capital Group and Annexus Retirement Solutions reinforces our commitment to helping build secure financial futures by providing participants an income solution that supports them not only up to – but all the way through – retirement.”