Retirement income solutions a top priority for 401(K) plan sponsors: PIMCO
Even though these giant financial firms BlackRock and T. Rowe Price are behind new lifetime income solutions, adoption by employers and plan sponsors to add these new “annuity” funds into their plans has been sluggish. However, retirement income options are under review for defined contribution executives, who still remain cautious about adding guaranteed income options to their plans, according to the 19th Annual Defined Contribution Consulting Study 2025, conducted by PIMCO, a global leader in active fixed income.
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PIMCO surveyed 35 consultants and advisory firms, who serve over 27,000 clients, as part of the firm’s effort to capture the breadth of views in the industry as well as services available amid rapidly changing demographics of plan participants. Published results were based on responses from firms with more than $8.8 trillion in DC assets under management.
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Published results highlight that DC Plan clients without an open Defined Benefit (DB) Plan are more likely to consider adding guaranteed income to the DC lineup, while those with an open DB Plan are more focused on adding non-guaranteed income strategies.
Congress reaffirmed the importance of lifetime income when it passed legislation in 2019 and 2022 that made it easier for employers to include annuities in workplace retirement plans.
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When asked to highlight DC plan sponsors’ top investment menu priorities, retirement income was top-of-mind for all consultants, who expect greater adoption of non-guaranteed income strategies compared to guaranteed income products.
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However, a deeper look across DC Plan types highlights the impact a DB Plan status can have. While the top priority for Corporate DC Plans is to evaluate new guaranteed income products, both public and non-profit DC Plans will review their existing non-guaranteed income strategies on the fund menu.
Plan sponsors are sensitive to the risks associated with guaranteed income products, compounded by challenges in benchmarking and limited options from current recordkeepers. When evaluating tradeoffs of guaranteed income products, consultants highlight that their sponsor clients have a strong preference for opt-in solutions that offer fee transparency, liquidity, and immediate income upon annuitization.
Interest in multi-sector fixed income is increasing due to its potential to help savers accumulate wealth through a broader opportunity set, sector rotation, and potential for higher yield generation, along with aiming to produce consistent income generation to support retirees.
Additionally, in the next year, roughly half of the consultants surveyed and one-third of the aggregators said they expect sponsors to adopt private market investments within their asset allocation offerings, with private credit as the most likely option.
“We have seen the emergence of new themes in our survey as the industry continues to evolve,” said Rene Martel, Managing Director and PIMCO’s Head of Retirement. “This year, blend TDFs and private investments have joined other priorities as plan sponsors broaden their offering to address the diverse needs of their participants.”