A growing number of defined contribution plans are either offering investment options to provide lifetime income in retirement or are considering doing so, according to a new survey from Willis Towers Watson, a retirement consulting firm.
Of the 164 DC plan sponsors surveyed, 30% offer lifetime income solutions, up from 23% in a 2016 survey, and almost 40% of them offer insurance based products such as annuities — primarily immediate or deferred income annuities — or investment solutions that include a variable annuity component.
In addition, 41% of DC plans that offer lifetime income solutions are looking to expand those options, up from 33% in 2016. Sixty percent of plans who have not adopted lifetime income solutions indicated they may do so in the future.
Their reluctance to offer such solutions reflect concerns about administrative and product complexity, high fees, portability restrictions, insufficient transparency, lack of demand by plan participants and fiduciary risk.
The survey defines lifetime income solutions broadly, including education and planning tools, systematic withdrawals during retirement and guaranteed income products.