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August 09, 2013 at 10:49 AM
When given the choice between a lifetime retirement income option — like an annuity — or taking a lump-sum payout from their defined benefit pension plan, few consider the annuity.
That’s according to the folks at the Employee Benefit Research Institute, who found that between 2005 and 2010, just 27.3 percent of those covered by a DB pension plan chose the annuity option.
Not surprisingly, the study found that plans that don’t offer a lump-sum distribution have the highest annuitization rate of 65.8 percent.
In 2010, the annuitization rate for all plans combined was 65.5 percent, while for plans with no lump-sum distribution options it was 98.8 percent. The rate for defined benefit plans with no restrictions on lump-sum payouts was 44.3 percent. For cash-balance plans with no restrictions on lump-sum payouts, it was 22.3 percent.
