A Call for Help: On the Pension Protection Act’s 10th
Anniversary, Employees Want More Planning Support from Employers
NEW YORK--(BUSINESS WIRE)--
Companies are underestimating how much help their employees want with
retirement planning, according to a new survey released by BlackRock
(NYSE:BLK).
Reflecting their own concern about the state of their preparation,
employees say employers should do more to help them prepare for
retirement, in particular by helping them identify ways to generate
income from savings and provide guidance on how much to save.
“Ten years ago, the PPA’s passage underscored the increasingly critical
role of retirement plans in employees’ lives, and plan sponsors have
worked hard since then to give more people access to the benefits of the
DC approach,” said Anne Ackerley, Head of BlackRock’s US & Canada
Defined Contribution Group. “It’s clear that, with DC plans more
critical than ever in safeguarding retirement well-being, plan sponsors
have an urgent opportunity to re-visit the intent of the PPA and
re-examine how to make their plans even more responsive to employee
needs. Effective tools are widely available to plan sponsors to make the
changes they need to keep plan participants on track to stable, secure
retirements.”
BlackRock’s Defined Contribution Pulse Survey polled 1,003 participants
in DC plans and 200 DC plan sponsors nationwide on a broad range of
retirement planning issues and challenges in October through November
2015.
Employers, Employees Not Totally In Sync on Retirement Readiness
While 59% of sponsors say the majority of their participants are saving
enough to retire with the income they will need, only 28% of the
participants surveyed are confident they are saving enough. Similarly,
64% of sponsors say their participants are “very” or “extremely”
informed about how much money they should be saving today for
retirement, but only 37% of employees say they are.
Companies and workers are also far apart on the topic of retirement
income: 58% of plan sponsors say workers are either “very” or
“extremely” informed on how to generate income from their retirement
savings; just 31% of workers say they are.
Despite this apparent disconnect, plan sponsors appear well aware of the
challenges participants face. Forty-nine percent of plan sponsors
surveyed agree that “my organization is facing an impending ‘retirement
crisis’ where participants will keep working because they are unable to
afford to retire.”
“Employers generally recognize that employees are under-prepared for
retirement, but in some ways the problem runs far deeper than they
realize,” said Ackerley.
HELP WANTED… with Retirement Income
The BlackRock survey makes clear that workers – particularly younger
workers – are eager for greater support for their retirement planning.
In total, 55% of workers say that their employer should provide more
help. The younger the cohort, the more decided the call for help: 63% of
Millennials think their employer should be doing more to help them
prepare for retirement, versus just 47% of Baby Boomers.
Better retirement income solutions represent one area where plan
sponsors might provide more of the support workers seek, according to
the survey. Although just 38% of workers have heard of products
providing a consistent stream of income in retirement, 88% of workers
said they would be interested in considering such a product (40% would
be “very” or “extremely” interested). Among plan sponsors, 69% agree
that there is a growing need for DC plans to provide retirement income
solutions and services – however, just 51% say they currently do so.
At the same time, 65% of plan sponsors agree that participants would
value more company help, and many are taking steps to make good savings
practices automatic. In the past 12 months, about one in four plan
sponsors have introduced auto-enrollment, auto-escalation and/or company
matching into their DC plan.
Plan sponsors also are focusing on their older participants: 60% say
they would like to find ways to encourage participants to stay in the
plan after they retire.
10th Anniversary of Pension Protection Act
To mark 10 years since the passing of the Pension Protection Act (PPA),
which created new mechanisms for building participation in
employer-sponsored DC plans, the survey examined views of the employer’s
specific responsibility in helping workers prepare for retirement.
In general, workers in DC plans have a positive view of their retirement
investing. Nearly 70% of workers chose the words “confident,”
“optimistic,” “hopeful,” “certain,” or “comfortable” when describing how
they feel about the investing they do through their DC plan. But nearly
half don’t agree that they are “on track” to retire with the lifestyle
they want.
Generational Differences
The survey revealed considerable differences among generational groups
when it comes to levels of retirement planning – suggesting that plan
sponsors need to think about targeted approaches in delivering support.
Millennials (age 25-34) see their retirement futures as bright –
they are the most likely to affirm that they are on track with their
retirement planning, and also most likely to be highly confident about
one day enjoying the kind of retirement lifestyle they want. But at the
same time, many are less involved in actual planning than workers in
other generations. For example, less than 25% say they have evaluated
their plan’s investment options and features, and only about one third
(36%) have increased contributions to their plan when possible.
Compared with other generations, Gen X’ers (age 35-50) are
generally least confident about attaining retirement goals, including
meeting their month-to-month expenses in retirement and leaving a
financial legacy to their family. Gen X’ers also feel less
informed about certain key aspects of their plan and the planning
process, including how to generate retirement income from their savings
and whether they are on track for retirement.
Baby Boomers (age 51-69), for their part, are split on what to do
with their retirement savings when they retire, with 24% saying they are
“not sure” what to do.
Call to Action for Plan Sponsors
The survey revealed considerable differences among generational groups
when it comes to levels of retirement planning. “In a sense, this can be
seen as proof of the effectiveness of the PPA,” said Ackerley. “Most
young workers have been automatically enrolled into workplace retirement
plans and have the mindset that saving for retirement is just part of
the working world.” The concerns felt by older generations suggest that
plan sponsors need to think about targeted communications and planning
tools in delivering support.
Survey results also suggest several steps that can be taken to help DC
plans go much farther for plan participants. Looking ahead, the DC
industry, employers and policymakers need to work together to improve
access to workplace 401(k) plans, get employees saving earlier in their
careers and saving more, help employees invest appropriately for their
life stage, and provide them with tools to responsibly generate income
in retirement.
As the industry’s largest investment-only DC plan provider, BlackRock
reaches over 10 million American workers and manages more retirement
assets than any other investment-only firm in the world. At December 31,
2015, BlackRock’s U.S. & Canada DC group managed $620 billion. BlackRock
provides a comprehensive range of tools, services and support to help DC
plan sponsors measure participants’ retirement readiness and closely
assess the needs of diverse workforces; implement new plan features to
boost participation, savings levels and age-appropriate investment, and
enhance communications programs to drive greater employee engagement
with the DC plan.
About BlackRock
BlackRock is a global leader in investment management, risk management
and advisory services for institutional and retail clients. At December
31, 2015, BlackRock’s AUM was $4.645 trillion. BlackRock helps clients
around the world meet their goals and overcome challenges with a range
of products that include separate accounts, mutual funds, iShares®
(exchange-traded funds), and other pooled investment vehicles. BlackRock
also offers risk management, advisory and enterprise investment system
services to a broad base of institutional investors through BlackRock
Solutions®. As of December 31, 2015, the firm had approximately 13,000
employees in more than 30 countries and a major presence in global
markets, including North and South America, Europe, Asia, Australia and
the Middle East and Africa. For additional information, please visit the
Company’s website at www.blackrock.com
| Twitter: @blackrock_news | Blog: www.blackrockblog.com
| LinkedIn: www.linkedin.com/company/blackrock
About the Survey
The BlackRock DC Pulse Survey is a major research study of 200 large and
mega defined contribution plan sponsors and 1,003 plan participants in
the U.S. executed by Market Strategies International, an independent
research company. The plan sponsors who were interviewed had at least
$300 million in assets, with nearly half of the respondents serving in
benefits or human resources roles, and the rest in finance, investment
or business management for their organizations. The 1,003 plan
participants surveyed were employed full-time and were participating in
their employer’s 401(k), 403(b), 457 or 401(a) plan, with at least
$5,000 in assets in their current account. All respondents were
interviewed using an online survey. For the sponsor sample, the survey’s
margin of error is +/- 6.9 percentage points; for the participant
sample, it is +/- 3.1 percentage points.
GMC-0150
View source version on businesswire.com: http://www.businesswire.com/news/home/20160224006248/en/
BlackRock
Farrell Denby, 212-810-8034
Farrell.Denby@BlackRock.com
Source: BlackRock