A look at the investment variables of variable benefits

Defined contribution pension plan providers and advisors say plan sponsors should offer and support in-plan decumulation options, according to a new survey by PIMCO Canada Corp.

The survey, which polled 12 DC plan providers and advisors, found more than half (53 per cent) of respondents said their plan sponsor clients haven’t considered implementing in-plan decumulation options, while nearly a quarter said they’re either planning to (15 per cent) or are in the process of (seven per cent) implementing one. Just six per cent said they’ve already implemented an in-plan decumulation option, while 20 per cent said they have no plans to do so.

Among the three-quarters of respondents with plan sponsor clients that are considering decumulation options, nearly half (48 per cent) are considering registered retirement income funds/life income funds, 14 per cent are considering annuities and five per cent are considering variable plans, while six per cent are considering a combination.

Read: My Take: Tackling decumulation today will lead to retirement-ready workers tomorrow

When asked which investment options they’d most likely recommend as a retirement income solution, respondents cited built-in payout strategies, such as target-date funds (64 per cent), multi-asset payouts (55 per cent), managed accounts (45 per cent), employer-developed white-label solutions (36 per cent) and in-plan annuities (27 per cent).

Nearly all (92 per cent) respondents believe retirees should be able to remain in their plan with investments that suit their needs. Although more than half (53 per cent) said they prefer that retirees move their assets out of their plan sponsor clients’ plans, nearly a quarter said they prefer (seven per cent) or actively seek (16 per cent) to retain these assets and 24 per cent expressed indifference. As well, more than a third of plan providers said they prefer (19 per cent) or are actively seeking (17 per cent) to retain these assets, while 44 per cent said they prefer retirees move them out of the plan altogether.

The main reasons respondents cited for wanting to move retirees out of their plans included regulations or fiduciary duty (33 per cent), an unwillingness to assume responsibility for the funds (33 per cent), a lack of potential solutions (25 per cent) and plan requirements to move those assets out (eight per cent).

Read: Report urges DC pension plan sponsors to focus on decumulation