Default Investment Option Addresses Longevity Risk

July 3, 2012 ( - United Technologies Corporation (UTC) is helping participants tackle longevity risk with a new default investment option.   

By Corie Russell | July 03, 2012
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UTC recently launched Lifetime Income Strategy, built to combine the simplicity of a target-date fund (TDF) with the security of lifetime income. This default investment option in the company’s defined contribution (DC) plan is based on a design by AllianceBernstein.

The Lifetime Income Strategy is an age-based default investment option through which each DC plan participant has access to a target-date portfolio built specifically for them.

PLANSPONSOR spoke with Mark Fortier, head of product and partner strategy at AllianceBernstein Defined Contribution Investments, about Lifetime Income Strategy and the importance of dealing with longevity risk.

PLANSPONSOR: How does Lifetime Income Strategy work?   

Fortier: Think of this as sort of the next evolution TDF. It has the same simplicity as a traditional TDF but in this case, the big benefit is it eliminates the biggest risk participants have, which is outliving their assets. Starting around age 48, it starts to acquire secure lifetime income for the participant, [and] it slowly increases the level of protection from zero at age 48 to 100% at age 60. So at 60, 100% of your assets are protected inside the lifetime income strategy. Lifetime income strategy looks like any other investment option to the participant. The big difference here is it will be the default for UTC. [The company’s default] used to be a traditional TDF.