Franklin Templeton, Pacific Life Join In-Plan Lifetime Income Push

A new defined contribution managed account offers participants a chance to invest in a deferred fixed-income annuity.

Reported by Alex Ortolani

Franklin Templeton (Franklin Resources Inc.) and Pacific Life Insurance Co. on Tuesday announced their entrance into the defined contribution lifetime income market through a defined contribution managed account.

The firms’ partnership will see Franklin Templeton’s Goals Optimization Engine advice offering guide participant’s to “determine how much should be allocated” to a deferred fixed-income annuity provided by Pacific Life. The offering is designed for participants to accumulate during their working years a future income stream for their retirement years.

“Once participants are ready to retire, they will then have the ability to turn that income stream on while receiving draw down advice on the remainder of their portfolio,” the firms wrote in an emailed statement. “This innovative approach to providing lifetime income to DC participants does so in a simple, holistic and personalized way.”

Franklin Templeton and Pacific Life enter an increasingly crowded field of DC retirement income options backed in various forms by direct annuity purchases or the option of annuitizing savings. While a popular topic in the retirement industry, the “pension-like” solutions are still in early stages of development, with firms such as Morningstar and Broadridge just recently developing methods of benchmarking and evaluating how they might work if implemented by plan sponsors.

Franklin Templeton and Pacific Life’s managed account can be set up by plan sponsors either as a participant opt-in or a qualified default investment alternative, according to the firms. It will be set up through a collective investment trust, which can offer lower fees when compared to investments such as mutual funds; the firms did not immediately respond to request for a fee range for the offering.

If participants leave the plan, they will “preserve the guarantees they’ve accumulated,” according to the firms’ email response. The firms also noted that they are using a middleware provider for the annuity that can integrate across multiple recordkeepers if those recordkeepers partner on offering the investment.

“Participants who leave their employer can retain their interest in the in-plan annuity until retirement, sell their investment and roll over to an IRA, or, if they are past [age 59.5], opt to take the annuity with either an immediate or deferred (up to age 73) payout,” the firms wrote.

As of now, Franklin Templeton and Pacific Life have a plan sponsor agreement to offer the solution and are working with that sponsor’s recordkeeper on implementing it, the firms wrote. They are also in conversations with other recordkeepers to start offering the investment on their platforms.

“This is a significant time for retirement income, and [we are] committed to partnering with advisors, consultants, asset managers and recordkeepers to connect plan sponsors with innovative lifetime income solutions,” the firms wrote.

The offering, the firms also noted, is the results of years of collaboration. Pacific Life noted in the announcement that studies it has conducted found 58% of respondents prefer “incremental lifetime income purchases” instead of a larger purchase of an annuity at retirement.

“The design of Income Horizon aligns with this preference for incremental purchases over time,” said Brian Woolfolk, executive vice president and head of institutional business at Pacific Life, in a statement. “When integrated with GOE, [it] creates a simple, holistic, and personalized approach to securing lifetime income in retirement for plan participants. This innovative solution built with Franklin Templeton is a significant advancement over the traditional one-size-fits-all approach.”

Tags
Annuities, Retirement Income,
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