State Street, Annexus Retirement Solutions Release TDF With Retirement Income Annuity

State Street Global Advisors and Annexus Retirement Solutions have partnered on a target-date-fund series that includes an embedded retirement income annuity, according to an announcement from the firms Wednesday.

The State Street GTC Retirement Income Builder Series will come with ARS’s embedded Lifetime Income Builder annuity in the TDF’s glidepath as a separate asset class, according to the firm. Global Trust Company will be the fiduciary and trustee of the investment vehicle.

ARS is planning to offer the product early in the third quarter of this year through iJoin, a retirement plan platform provider connected to more than 50 recordkeepers. Once established, those recordkeepers and the plan sponsors in the iJoin network can provide participants access to the TDF through the plan menu or a managed account, says Dave Paulsen, chief distribution officer at ARS.

“The participant has said to us that they want to maintain control all the way to and through retirement,” Paulsen says. “We built this inside of a TDF because the majority of plan participants want [their investing and retirement income setting] done for them, and the target-date does that. … It’s liquid, it’s easy for them and it doesn’t sacrifice growth.”

The Lifetime Income Builder product within the TDF trades like a mutual fund and has a trading symbol, Paulsen says, making it portable across recordkeeper platforms should a participant change provider or a participant leave for a new employer. Paulsen says the model is unique, and that ARS has a patent application pending on the product. He compares it to other, less portable products in which a participant buys an annuity directly when near or in retirement.

“The majority of participants aren’t getting advice from an adviser on how to allocate their assets or buy an annuity,” he says. “We package it and do it all for them without harming growth or adding excess fees.”

Paulsen says the firm is also in talks with two top-tier recordkeeping platforms, with those conversations expected to lead to partnership later this year.

The need to solve the “decumulation” problem for retirement savers is bringing in-plan annuity providers and recordkeepers into conversation across the retirement industry. Communicating the value of annuities in retirement plans to advisers and sponsors has been a key focus area for industry groups such as the Insured Retirement Institute and companies such as Broadridge Financial Solutions’ Fi360, who has put together educational and comparative tools around in-plan annuity offerings.

The new State Street TDF series is designed to mitigate sequence risk—in which a participant sees a drop in savings near or in early retirement—and longevity risk when in retirement by “capturing quarterly high-water marks” on the account value, according to the announcement. The TDFs will target a 6% annual income rate, with the final amount calculated using the high-water mark of the fund.

The Lifetime Income Builder annuity is backed by insurers Nationwide and Athene, with more lined up to join the series, according to the announcement. State Street Global Advisors will provide glidepath recommendations to the trustee, GTC, and manage a portion of the solution’s underlying assets.

State Street and ARS announced a partnership to work on a TDF with an embedded annuity in March 2022.