Employers Ready to Act on Lifetime Income, But Struggle with ‘Annuity Fluency’
December 17, 2024 by Ted Godbout
Five years after enactment of the SECURE Act, new research suggests that more employers are primed to offer lifetime income options within their plans, but adoption of these products may be hindered due to a lack of “annuity fluency.”
Overall, roughly 3 in 4 DC plan sponsors — or 76% — expect demand for annuities will grow over the next five years, similar to how target-date portfolios took off once policymakers paved the way for them to be the default. In addition, more than 40% of plan sponsors that don’t already offer an annuity say they plan to do so in the next two years.
Click HERE to read the full story via NAPA
Wink’s Moore on the Market: TIAA did some research around in-plan annuities.
“Overall, roughly 3 in 4 DC plan sponsors — or 76% — expect demand for annuities will grow over the next five years, similar to how target-date portfolios took off once policymakers paved the way for them to be the default. In addition, more than 40% of plan sponsors that don’t already offer an annuity say they plan to do so in the next two years.”
So, that’s encouraging.
“In fact, 85% of sponsors say that employees need additional sources of guaranteed lifetime income beyond Social Security, and nearly 6 in 10 (59%) cite Social Security’s uncertain future as the top external factor driving them to add or consider adding annuities to DC plans. They also note increased adoption by other employers (52%) and changing demographics, such as longer lifespans (48%).”
All good reasons.
However…
“Notably, the survey also found that the adoption of annuities in DC plans may be slowed by a lack of understanding of annuities and how the products work. Most employers (85%) said they understand the basics of how annuities work. But somewhat surprisingly, the survey found that only 37% of sponsors say they can articulate the value and importance of annuities. Said another way, 63% of respondents admit they need help understanding how annuities fit into a plan and a portfolio.
Among sponsors planning to offer annuities, the top two barriers are a lack of understanding among decision-makers (39%) and complexity (39%). For those not planning to offer annuities, lack of understanding (43%) is the No. 1 barrier.”
Not surprising.
However, I thought everyone would like to see the stats. -sjm
