The word annuity on building blocks.
As economic uncertainty grows, insurance carriers are accelerating their shift toward guaranteed retirement income solutions and platform innovation, according to Goldman Sachs Asset Management’s (GSAM) annual annuity industry survey. The trend is clear: in-plan annuity options or features will be a key priority in the coming years as existing solutions begin to pave the way for more informed product development, say insurers.
As the retirement industry continues to grapple with in-plan annuity features, the need for supporting sustainable income throughout retirement grows. Trends are focused on in-plan features and integration with asset solutions, such as Target Date Funds and Managed Accounts, according to GSAM’s Change on the Horizon, the fifth annual pulse-check of insurance carrier market sentiment, product innovation, and distribution strategy.
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While these integrated options – Target Date Funds and Managed Accounts – are used in a limited capacity today, this will be an important area of growth, as 50% of insurers are currently offering or considering implementing within Managed Accounts and 39% in Target Date Funds or qualified default investment alternatives (QDIAs) in defined contribution plans.
GSAM’s just- released survey gathers insights from US annuity providers to identify market trends and uncover emerging product and distribution themes. In-plan income is now a top priority- 64% of insurers rank in-plan annuities among their top three business priorities. Integration into managed accounts and target-date funds is on the rise, and 53% believe auto-default features will be key to driving broader adoption.
“Our latest survey makes it clear that insurers are not standing still,” said Marci Green, Head of Retirement Distribution and Third-Party Insurance, Americas at Goldman Sachs Asset Management. “They are reassessing annuity platforms to reflect real concerns around market volatility, longevity, and investor engagement. It is not about offering more products. It is about offering the right ones … We’re witnessing a meaningful shift as insurers prepare for a new era- one that is focused on delivering more sophisticated, flexible product solutions, streamlining sales efficiencies, and providing education tools that meet clients where they are.”
In-plan retirement income has been an important topic for well over a decade, and 64% of insurers cite this as one of the top three priorities for the annuity business. Additionally, 56% of respondents are in the market with an in-plan annuity solution today and another 33% are considering different options but are not in market yet.
“While this has been a slow-moving development, emerging solutions continue to look more viable, and we expect product innovation to continue,” according to the survey. “Notably, many solutions combine both asset and insurance solutions to create an integrated experience for plan sponsors and participants. Insurers seeking new asset management partners are looking for recordkeeper relationships, brand recognition and consultant relationships.”
In-plan annuity product development continues at a moderate pace, according to the survey, and while adoption has been limited, the industry is optimistic that annuity solutions will be an important part of 401(k) plan evolution.
Related: Gimme pension: Workers call on employers to offer lifetime income in their 401(k) plans
Respondents view their clients’ primary objective of retirement income to be the guarantee of a consistent stream of income throughout retirement. This is followed by longevity protection, i.e., guaranteeing income during later retirement years. Additionally, the keys to improving adoption of retirement income solutions are believed to be plan design defaults, better engagement and more product innovation.
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
