Plan sponsors are seeking more personalized solutions to
encourage workers to stick with their 401k provider after they leave the
workforce.
In PIMCO’s just released Annual Defined Contribution
Consulting Study, about 80% of aggregators and 65% of large institutional
consultants recommend personalizing retirement offerings for their clients who
provide individual retirement plans. Additionally, 76% of plan sponsors prefer
to retain retiree assets, up from less than half in 2015.
Finding ways to retain retiree assets found that flexibility
in income distribution, adding retirement education/tools and communicating the
value of staying in plan, were among the top recommendations from those
surveyed. And while most plan sponsors prefer to retain retiree assets in the
plan, the respondents diverged on recommended retirement income solutions.
Institutional consultants prefer target-date funds (TDF) with regular level
payout, whereas aggregators prefer managed accounts as a retirement income
solution.
TDFs remain popular, ESG on the rise
TDFs remain a popular choice garnering a “near-unanimous”
recommended default option, with all consultants and advisors surveyed ranking
it as their top pick. Two-thirds of institutional consultants and advisors said
reviewing TDFs was a top priority, indicating they are keeping a close eye on
fees and performance.
Institutional consultants and aggregators are also
recommending TDFs that blend active and passive management styles more.in most
plan size segments.
Interest in non-traditional defined contribution investments
also increased. Over 80% of consultants surveyed consider environmental, social
and governance (ESG) when selecting investment options. In addition, one-third
of consultants believe private investments benefit all clients’ multi-asset
portfolios; direct real estate, private equity and private credit receive
highest consideration. ESG remains a solid contender when selecting investment
options, emerging as a top three concern among plan sponsors.
“A generational shift
in how Americans plan for retirement is creating demand for a more dynamic
approach to saving and technological advances have made solutions tailored to
plan participants’ specific circumstances much more accessible to the broader
public,” said Rene Martel, Managing Director and PIMCO’s Head of Retirement.
Published results were based on responses from firms with
more than $10 billion in defined contribution assets under management.
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