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Retirement Planning > Retirement Investing

Retirement Income Will Be 'Biggest Trend' Over Next 5 Years

By Warren S. Hersch

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Plan sponsors and recordkeepers agree that a focus on retirement income will be one of the biggest retirement practice trends to emerge in the near future, new research reveals.

MetLife, New York, disclosed this finding in a new report, “Retirement Income Practices Study: Perspectives of Plan Sponsors and Recordkeepers for Qualified Plans. The study examines the dynamics of the plan sponsor-recordkeeper relationship with regard to the provisioning of lifetime income options in qualified plans. 

The study also assesses whether, and to what extent, plan sponsors of defined benefit (DB) and defined contribution (DC) plans and recordkeepers are communicating about – and closely coordinating their efforts to offer – retirement income education, strategies and solutions for their participants. 

Ten of the 12 recordkeepers surveyed say an increasing focus on retirement income is among their top predictions for the next three-to-five years. And one-third of plan sponsors agree–the most frequently cited prediction among this group.

The report adds that plan sponsors favor a self-service approach to modeling retirement income projections for their plan participants, but note that a “do-it-yourself” model is not taking hold among participants. The majority of recordkeepers surveyed estimate that 25% of plan participants or fewer have projected their retirement income.

Nearly half (44%) of plan sponsors say the majority of their DC plan participants would prefer to “receive at least part of their retirement savings as monthly income for as long as they live rather than receiving all of it in a lump sum that they would invest themselves.” Additionally, 68% of plan sponsors say they believe the majority of their DC plan participants favor “guarantees that offer stable but somewhat lower returns” over a “higher degree of risk because the returns could be greater.”

However, income annuities, which combine stable returns and guaranteed lifetime income, are not yet widely offered by plan sponsors. Only 16% of plan sponsors surveyed offer an in-plan retirement systematic income option. Of these plan sponsors, the most widely offered option is an in-plan deferred annuity (27%).

More than half (56%) of plan sponsors that offer an in-plan retirement income option don’t know what type of product is being offered. Eight in 10 plan sponsors (79%) say that fiduciary liability concerns are discouraging them from offering income annuities within their DC plan.

More than half of plan sponsors (56%) also believe these concerns are dissuading their recordkeepers from more widely offering these products on their platforms. Most plan sponsors (62%) believe their company is more concerned about annuity-related fiduciary liability issues than their recordkeeper, the study reveals.

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