BlackRock’s strategy of mixing target-date funds and annuities is taking off, with five major retirement plans having signed up for it, the company said Wednesday.
The financial services giant announced the product, LifePath Paycheck, in May 2020. It was BlackRock's second attempt at the concept, having floated another pairing of target-date funds and annuities in 2008 that never got off the ground.
This iteration is different, and defined-contribution plan sponsors appear to be more comfortable with in-plan annuities than they have been in the past, in part because of the SECURE Act and additional guidance from the Department of Labor.
The sponsors that have signed on for the new service collectively represent more than $7.5 billion in plan assets, BlackRock said in its announcement. One such plan is the Tennessee Valley Authority Retirement System.
“With initial plan adoptions expected in 2022, this action will provide the option and opportunity for over 120,000 U.S.-based 401(k) plan participants to obtain a guaranteed income stream in retirement,” the company said.
LifePath Paycheck includes fixed annuities from Equitable and Brighthouse Financial that plan participants can choose at age 59½. The product begins allocating assets to group annuity contracts when a participant turns 55, and the insurance component eventually represents about 30%, although participants are not locked into annuity contracts, and the assets are fully liquid, the company noted last year.
At least one record keeper, Voya Financial, has the BlackRock product in its system.
“Alongside plan sponsors, the investment consultant and plan adviser community has long acknowledged the need for solutions that assist participants through retirement,” BlackRock said in the announcement. “Following extensive due diligence on the retirement income landscape and offerings, firms such as Aon, Willis Towers Watson, Lockton and Compass Financial Partners, a Marsh & McLennan Agency company, among others, have been supportive of retirement income solutions.”
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