While a third (34 per cent) of U.S. defined contribution pension plan sponsors say they’re studying decumulation solutions and another 15 per cent are in the process of evaluating or implementing one more than a quarter (27 per cent) say decumulation isn’t a topic of interest or need, according to a new survey by consultancies Coalition Greenwich and PGIM.
The survey, which polled more than 150 DC plan sponsors, found among organizations that are tackling decumulation, 70 per cent said they’re using stable value funds to support members’ retirement income, followed by income funds in a target-date fund series (46 per cent), long-duration fixed income (25 per cent) and non-guaranteed retirement income options such as target-duration funds and risk-based funds (25 per cent).
The survey also noted most DC plan sponsors that offer a TDF don’t offer alternative investments as part of the fund. Just nine per cent said they incorporate private real estate equity and just six per cent said they incorporate private credit or private real estate debt.
The survey also found 21 per cent of plan sponsors said they offer alternative investment options — such as hedge funds, liquid alternatives, real estate private equity, real estate private debt and private credit — on their 401(k) menu, compared to only nine per cent in 2020.
Just 28 per cent of plan sponsors said they offer at least one environmental, social and governance fund through their 401(k), while 12 per cent said they offer an ESG target-date fund series. However, 36 per cent said ESG isn’t a topic of interest.
“As DC plans continue to evolve from savings vehicles to true retirement plans, retirement income will become a more pertinent focus area for plan sponsors, requiring more research and action,” said Mikaylee O’Connor, senior DC strategist at PGIM, in a press release. “Plan sponsors don’t need to face this journey alone — they should continue to leverage experts and lean on strategic partners for guidance.”
Read: My Take: Tackling decumulation today will lead to retirement-ready workers tomorrow