Data & Research October 5, 2023

Survey: 73% of Top Advisers Chat In-Plan Annuities With Clients

PLANADVISER’s quarterly pulse survey finds the majority of retirement plan advisers “occasionally” discuss in-plan options, but some don’t see the market as viable yet.

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Adding retirement income annuity options into defined contribution plans is making its way into conversations between plan advisers and plan sponsors, though not necessarily for implementation in plan design, according to our latest survey.

In the Q3 PLANADVISER Top Retirement Adviser Pulse Survey, 60% of respondents said they occasionally talk about in-plan retirement income with clients, and another 12.5% say they always do. But within that group, many say they are only using them as a talking point while recommending other strategies for distribution.

When asked whether in-plan options are part of retirement plan committee discussions, most advisers said yes, at least sometimes:

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Question: In your conversations and check-ins with plan sponsors, do you discuss a retirement income annuity option for plan participants?

  • Always
  • Occasionally
  • Never
  • Other

When it came to the types of annuity options being discussed, the tendency veered toward ease of implementation. For instance, the most popular option (31%) for discussion was providing an annuity option in a target-date fund—a product still in the opening innings in terms of implementation by recordkeepers.

The second most popular option (27.5%) was to purchase institutionally-priced annuities from a menu—similar to a program created by Kelly Hueler and bought by Morningstar Inc. in 2020.

The third most popular option was “Other,” at 27.6%, with respondents noting “multiple options” depending on need, and a couple noting they are just discussing the concept of retirement income and potential strategies. A few more said they are not discussing any annuity options.

Question: What type of retirement income annuity option do you discuss?

In-plan annuity available via managed account
3.4%
In-plan annuity available via target-date fund
31%
Out-of-plan retail annuity
0%
Institutionally priced annuity via platform such as income solutions
27.6%
Guaranteed minimum withdrawal benefit rider
3.4%
Guaranteed lifetime minimum withdrawal benefit rider
6.9%
Other
27.6%

When asked about the future, advisers remain on the fence about discussing in-plan annuity options, with 80% still giving it a “maybe.”

Question: Do you plan to discuss retirement income annuities in the next one to two years?

  • Yes
  • No
  • Maybe
  • Other
Finally, we asked top advisers their ideal options for a guaranteed income annuity for plan participants. The answers came in similarly to those already being discussed, with a TDF option leading, followed by an institutionally-priced rider option. In this case, however, 20% noted that they do not prefer an annuity option and will stick to other distribution methods in retirement.

Question: What would your ideal retirement income solution be if it could be available from the top recordkeepers and at an appropriate fee? If no annuity is preferred for retirement income management, select “Not preferred—rather manage through distribution strategy.”

In-plan annuity available via managed account
10%
In-plan annuity available via target-date fund
31%
Out-of-plan retail annuity
0%
Institutionally priced annuity via platform such as income solutions
27.5%
Guaranteed minimum withdrawal benefit rider
5%
Guaranteed lifetime minimum withdrawal benefit rider
5%
Not preferred – rather manage through distribution strategy
20%
0ther
12.5%
In comments, some advisers noted that they do not feel the annuity market is mature enough yet to discuss with clients. One wrote that there is “way too much product out there for us to be ready to have any serious discussions about this.”

Another said, “Everyone is still new to this. BlackRock is the closest on a TDF.”

The pulse survey was fielded in September and taken by 42 retirement plan advisers among PLANADVISER’s 2023 Top Retirement Plan Advisers list.

 

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