A third of U.S. plan sponsors say they’re very or extremely confident in their participants’ ability to retire at their target age, up from just 18 per cent one year ago, according to a new survey by MFS Investment Management.
The survey, which polled more than 150 U.S. defined contribution pension plan sponsors, found their growing confidence is attributed to factors such as strong contribution rates (94 per cent), participant engagement (67 per cent) and the effective use of tools and services (54 per cent).
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Challenges remain, however, with 77 per cent of respondents citing current economic conditions as a major concern impacting retirement readiness.
Seven in 10 (70 per cent) plan sponsors said they believe personalized advice is key to improving retirement outcomes. Three-quarters (74 per cent) currently offer advice services, while 62 per cent offer direct access to personalized advice for all participants and 37 per cent deliver similar services via an in-plan, managed account offering.
The survey also found some sponsors remain cautious regarding alternative strategies becoming more widely available in qualified retirement plans. The majority cited little to no interest in including alternative strategies in plans, and 64 per cent reported their participants similarly demonstrate little if any interest in the asset class.
The majority (86 per cent) of respondents confirmed target-date funds are the qualified default investment alternative option in their plans. When asked which specific risks they hoped to address by offering TDFs, diversification topped the list at 38 per cent, followed by downside market risk near retirement (22 per cent), behavioural risk (19 per cent) and longevity risk (12 per cent).
Roughly two-thirds (65 per cent) confirmed their plans offer actively-managed strategies. Of those respondents, slightly more than half believed active management is a better way to implement certain strategies, while 86 per cent said it’s good practice to offer a mix of both active and passive strategies.
“Plan sponsors clearly recognize the increasing demand for tailored guidance among participants and the survey findings further emphasize the importance of providing access to advisors,” said Jeri Savage, lead retirement strategist at MFS, in a press release. “Retirement is a deeply personal journey; we would encourage sponsors to evaluate whether their plans are able to meet participants’ growing expectations for access to personalized advice.”
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