More plan sponsors seeking to keep participant assets in plan after retirement
PIMCO's recent 15th annual defined contribution consulting survey also finds 401(k) plans pivoting to solutions for retirement income.
An emerging trend in 401(k) plans is a growing interest on the part of plan sponsors in keeping participant assets in plan even after participants retire. That’s according to PIMCO’s recent 15th annual defined contribution consulting survey. Three-fourths of responding plan sponsors said they prefer to keep participant assets in plan after participants enter retirement, up from less than half in 2015.
For plans seeking to hold onto such assets, the most popular plan consultant recommendations included allowing flexibility in income distribution, adding retirement education/tools and communicating the value of staying in plan.
“[I]t is clear that plan sponsors are changing how they view 401(k)s from what historically had been a vehicle for savings to one that will generate income for participants,” said Rene Martel, head of retirement for PIMCO, a fixed-income investment manager.
Among the other findings:
Target-date funds: Target-date funds remain the most recommended Qualified Default Investment Alternative, with all consultants and advisors surveyed ranking it their number one choice.
More than two-thirds of institutional consultants said reviewing TDFs was a top priority, indicating they are keeping a close eye on fees and performance.
Active and passive management: The majority of consultants recommend a blend of actively managed and passive funds for core investments, with more than 90 percent preferring an active-passive blend for equities and 87 percent favoring all-active for capital preservation.
Of the survey respondents, 67 percent preferred an active/passive blend in fixed income, with the others favoring all-active.
ESG investment options: Interest in ESG investment options continues to grow, with more than half of consultants already or planning to recommend sustainable options. However, 54 percent of those surveyed said they needed to have greater regulatory/legal comfort before implementing an ESG solution.
PIMCO surveyed 47 consultants and advisory firms that serve more than 33,000 clients with $6.7 trillion in total assets in defined contribution plans as part of the firm’s effort to capture the breadth of views in the industry as well as services available amid rapidly changing demographics of plan participants. Published results were based on responses from firms with more than $10 billion in DC assets under management.
“The survey’s findings reflect the ongoing changes in defined contribution — a pivot to solutions for retirement income, best practices for default fund/target date funds and evaluation of ESG products — and provide invaluable insights for sponsors and consultants who want to best serve end investors,” said Julie Meggers, PIMCO’s global head of consultant relations.
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