Five large plan sponsors hopped on board to support BlackRock in implementing its LifePath Paycheck annuity solution as the default investment option in their employees’ retirement plans, the company said.
The New York-based asset manager plans to launch LifePath Paycheck (LPP) in 2022. The income solution will provide the option for more than 120,000 U.S.-based 401(k) plan participants to obtain a guaranteed income stream in retirement, the company said.
“The need for lifetime income solution delivered simply is becoming increasingly acute as more people have gone from receiving a check in the mail every month to a single lump sum of savings in retirement. Our goal with LifePath Paycheck is to recreate that experience providing income security in a defined contribution plan,” Robert Crothers, head of product for BlackRock’s retirement group, said during a company sponsored webcast yesterday.
Crothers said LPP builds on what works by embedding an annuity in a target-date fund.
“Importantly, the innovation that we are talking about today isn’t just taking an off-the-shelf insurance product and opening it next to a target-date fund. This is true innovation and I think the ecosystem needs to come together to deliver better outcome,” Cothers said.
In a separate statement, Mark McCombe, BlackRock’s chief client officer, added, “As Americans are living longer and healthier lives, their risk of outliving their savings is accelerating the ‘silent crisis’ of financial insecurity in retirement. By addressing spending and income in retirement, we’re working alongside our clients and partners to help more people address these challenges.”
BlackRock said the five plan sponsors that have opted to work with the company to LPP solution represent more than $7.5 billion in target-date investments. Among the plan sponsors is the Tennessee Valley Authority Retirement System (TVARS), BlacRock said.
LifePath Paycheck embeds annuity contracts issued by Equitable and Brighthouse Financial directly into a target-date strategy. When a participant reaches age 59 ½, LPP offers the participant the option to purchase fixed individual retirement annuities from the insurers that will provide a guaranteed stream of income for life, the company explained.
BlackRock noted that firms in the recordkeeping community, including Voya Financial and Empower Retirement, continue to support the opportunities for individuals to be able to obtain a guaranteed income stream in retirement.
Jeff Cimini, senior vice president, retirement product management at Voya Financial, who participated in the webcast, said Voya’s research found that 90% of individuals believe it is important to have a guaranteed source of income in retirement so they do not outlive their savings.