UBS Global Asset Management and Genworth Financial Inc. have announced a deal to introduce a guaranteed income for life option for 401(k) participants that will be made available with UBS’s recently announced target retirement funds and other investment options. The income for life benefit should be available by the end of the first quarter and results from a collaborative effort between UBS Global Asset Management and Genworth Financial of Richmond, Va.
“This guaranteed income for life option is the final piece of the puzzle–we are now able to help plan sponsors provide employees assurance that they will not outlive the income they receive through retirement,” says Drew Carrington, head of the defined contribution and retirement solutions at UBS, in a January 22 statement.
The benefit has been designed to allay investor worries that Social Security and defined benefit pension plans may not be sufficient sources of future income. It aims to be easy to understand, low cost and portable and allows remaining assets to be passed on to beneficiaries.
Subject to regulatory approval, the new benefit will allow 401(k) participants to withdraw five percent of their highest annual locked-in portfolio value for life, even if total withdrawals ultimately exceed the value of their portfolios, according to UBS. In addition, the guaranteed income a participant receives can rise if the total value of their portfolio increases during strong performing markets.
The benefit will be available for enrollment by 401(k) participants beginning at age 50. The minimum value of the income for life guarantee is based on the account balance at the time of enrollment. Thereafter, future contributions and positive market performance can increase the guaranteed withdrawal amount. Market declines will not affect the level of guarantee.
Automatic withdrawals of 5 percent of the highest locked-in account value can begin at age 65. In the event a participant dies, any remaining assets pass on to their beneficiaries. The lifetime income guarantee will be portable, and preserved via an IRA rollover.