25, 2012 (PLANSPONSOR.com) - As concern over benefits costs rises, companies
also worry about their employees’ ability to save adequately within defined
contribution (DC) plans, a Prudential survey found.
to “The Future of Retirement and Employee Benefits,” which surveyed senior
finance executives this year, a majority of respondents (69%) expressed concern
that employees might have to delay retirement because of inadequate savings.
Delaying retirement can have an impact not just on employees—it can constrict
new hiring and overhang advancement for existing staff.
agreed that DC plans need enhancements and are scrutinizing retirement income,
risk-mitigation products and investment strategies to enable more employees to
retire as planned.
Tipp, chief investment strategist for Prudential, predicts that bonds will
become a more significant part of plan portfolios. “Bonds do better than people
expect,” he told PLANSPONSOR. “People
expect a zero or negative bond return, but it’s been higher. People need a
continuing return on principal, and they are sick of stocks, sick of real
have been increasing their use of target-date funds within DC plans for the
last few years. But there is room for improvement, and 59% of respondents
agreed that target-date funds need to be enhanced to prove more protection
against a volatile market.
value investments are also becoming more attractive: 57% of executives confirm
that their plan participants are expressing more interest in stable value
products, which provide principal protection and predictable returns that have
historically exceeded the rate of inflation.
in guaranteed lifetime income products is also increasing. More than a third of
respondents (41%) said their companies are at least somewhat likely to offer
these products in the future, up from 30% in a survey conducted in 2010. The
majority of executives surveyed (58%) agreed that providing guarantees in the
form of downside risk protection would help DC plan participants stay invested
in the stock market.