A greater number of defined contribution (DC) plan sponsors are prioritizing retirement income solutions, finds a recent report by PIMCO.
The firms latest “Defined Contribution Consulting Study” found that nearly 90% of large institutional consultants say the top priority for clients is to find solutions for generating income in retirement, a 21% increase over the previous year. Evaluations of such products were cited as the DC service with the highest growth, found PIMCO.
When asked why they are considering retirement income solutions, 75% say plan sponsors “want to provide participants with a range of options to meet their diverse retirement needs.” Fifty-seven percent add that many clients prefer the “liquidity and flexibility on a non-guaranteed product,” while 57% prefer the “lower cost and complexity of non-guaranteed products.”
Two-thirds of those surveyed said their clients preferred or actively sought to retain assets of workers once they retire. PIMCO also reports a unanimous support among consultants for plan sponsors to offer investments and services for retirees with more than 50% of plan sponsors already implementing such plans.
“The focus on retirement income continues to be a theme that is top of mind for consultants and their clients,” said Rene Martel, managing director and PIMCO’s head of Retirement, in a statement. “As more and more workers enter retirement, we expect to see a secular shift toward income generating investments and services for those who spent decades saving for retirement through defined contribution plans like the 401(k).”
Other findings from PIMCO show that:
- Plan sponsors are making progress in adding retirement income solutions with a focus on plan design, education and expanding investment options for retirees on plan menus.
- Consultants expect Qualified Default Investment Alternatives (QDIAs) to incorporate more personalization in the future, especially if delivered at a lower price point and in a manner that reduces the need for direct participant engagement (for example, potentially using record keeper data).
- Aggregators and Institutional Consultants often take diverging paths to addressing retiree needs; personalized vs. incremental approach to evolving plan menus; Institutional Consultants and Aggregators both typically offer retirement income product evaluation and implementation services; differ on their approach to plan participants.
The survey fielded responses from 28 consulting and advisory firms with over 15,000 clients and aggregate DC assets of over $7.94 trillion.
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