Data & Research November 19, 2015

Pension Buy-Out Market Still Red Hot

The third quarter of 2015 was the first time $3 billion in pension buy-out sales were recorded in consecutive quarters.
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In the third quarter of 2015 U.S. group pension buy-out sales reached $3.2 billion, according to a LIMRA Secure Retirement Institute sales survey.

Following second quarter sales of $3.8 billion, this marks the first time consecutive quarters experienced $3 billion in sales.

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LIMRA says traditionally, pension buy-out sales tend to spike in the fourth quarter with far less activity in the first three quarters. In 2015, however, pension buy-out sales have eclipsed $8 billion for the first nine months of the year—a 415% increase over the $1.53 billion in sales for the first nine months of 2014. Sales in the first three quarters of 2013 totaled $1.43 billion, and sales in the first three quarters of 2012 totaled $1.42 billion.

“We’ve seen 195 new contracts so far in 2015, compared to 159 contracts in the first nine months of 2014,” notes Michael Ericson, research analyst for LIMRA Secure Retirement Institute.

Trends show more small and medium-sized companies are seeking pension buy-outs, LIMRA says. Years of low interest rates and increasing premiums charged by the Pension Benefit Guarantee Corporation (PBGC) has compelled more organizations to consider transferring their pension risk to a group annuity.

To date, 13 financial services companies provide group annuity contracts for this market.

Data & Research November 19, 2015

Millennials' Savings Compete With Vacations and Dinners

Dinners out and student loan debt are just two of the factors squeezing Millennial’s ability to save.
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Millennials face a unique set of obstacles when saving for retirement, says a new study by Schwab Retirement Plan Services. 

Every generation has its reasons not to save for retirement. For Millennials, more than any other, an unwillingness to sacrifice things they believe improve their quality of life and crushing student debt top the list. Schwab’s research echoes other studies of Millennial savings behavior, which find that they’re confused about the process, or squeezed by student loans, and generally need more financial education and support.

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Millennials face several obstacles to meeting their retirement savings goals, which disproportionately affect this group more than any other. Moreover, although this younger generation believes they would benefit from help, they are using professional investment advice far less than their older counterparts. Forty-four percent are not saving more because they want to treat themselves to things like occasional dinners out and vacations, more than Gen Xers (34%) and Boomers (29%).

More than a third of Millennials (37%) can’t set aside more money for retirement because they are still paying off student loans. About half (49%) feel they are clueless when it comes to their best investment options, and only a third (34%) are extremely or very confident in their ability to make the best 401(k) investment decisions on their own.

While three-quarters (76%) claim they would like help managing their 401(k), only 22% are likely to seek out professional investment guidance, and just 7% are currently receiving it.

Catherine Golladay, vice president of participant services and administration at Schwab Retirement Plan Services, admits that managing a 401(k) can often be intimidating for young people with little to no investing experience. “Our survey found that six in 10 Millennials wished there was an easier way to choose the right investments for their 401(k),” she says. The firm’s recommendation, that receiving investment advice early on can ease anxiety and boost confidence, can be a clarion call to retirement plan advisers looking to support these Millennial plan participants.

Schwab Retirement Plan Services based its findings on online interviews between May 26 and June 3 of 1,000 401(k) participants working for companies with at least 25 employees.

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