Recordkeepers Prepare for Heightened Retirement Income Demand

As retirement income demand accelerates, offering guaranteed and non-guaranteed solutions is critical to both a recordkeeper’s business growth and to a participant’s retirement strategy, according to the Defined Contribution Institutional Investment Association’s Retirement Income Solutions: Recordkeeper Distribution Study, published this month.

Simplicity was the word most recordkeepers used to define criteria for future leading solutions, according to DCIIA’s report. Recordkeepers’ top recommendations for the industry included simplifying across the board. Specifically, they suggested simplifying understanding of retirement income products by training the product provider’s staff, participants and plan sponsors; simplifying integration into recordkeeping platforms by reducing custom builds and leaning into strategic partnerships and middleware technology; and simplifying the user experience by improving the interface for enrollment, education and decision points.

Guaranteed Solution Availability Inches Up

Offering guaranteed income products is now the norm among recordkeepers: 77% of survey respondents reported offering at least one annuity to participants on their platforms. The availability of fixed index annuities has more than doubled since 2024, to 48% from 22%, and income annuity offerings grew to 52% from 33% in 2024. Guaranteed lifetime withdrawal benefits were the most frequently offered lifetime-income product in 2024 (available from 39% of recordkeepers), and availability grew by 4 percentage points, to 43%, over the past two years.

Among recordkeepers on the fence about offering guaranteed income solutions (38%), the top reasons for not offering them were assessing the revenue opportunity against the costs to build and maintain an annuity offering, waiting for increased sponsor demand and watching for increased general adoption rates of retirement income solutions.

Non-Guaranteed Options Remain Steady

The report found little change in the availability of non-guaranteed solutions, except among recordkeepers that in 2024 reported offering interest- or dividend-only distributions. While 18% of recordkeepers reported offering those options in 2024, none reported offering them this year.

Most recordkeepers offered participants the option of withdrawing from their balances in fixed dollar amounts (86%), fixed percentage amounts (76%) and amounts calculated based on participants’ life expectancy (57%).

Across all non-guaranteed solutions, the number of recordkeepers charging a fee for withdrawals decreased. The most significant decrease was the 32% of recordkeepers charging a fee for required minimum distributions in 2026, down from 57% in 2024. Additionally, a significant majority of recordkeepers (77%) were receptive to exempting from distribution fees non-guaranteed investments if they were part of a packaged retirement income solution.

Preparations and Concerns

Overall, recordkeepers said they expected plan sponsor adoption rates of retirement income solutions to increase over the next year or two. Respondents predicted adoption of guaranteed (64%) and blended (68%) solutions to grow the most, compared with non-guaranteed solutions (55%), according to the survey.

Nearly two-thirds of recordkeepers reported taking proactive steps internally to prepare if demand for retirement income suddenly spikes soon. Recordkeepers most commonly reported developing participant-facing income illustration tools and educational resources (85%), as well as adding staff members or increasing the share of their staff that is better-trained on retirement income products (85%).

While recordkeepers said they expected to be the industry players sharing the bulk of educational materials with participants, they reported relying on product providers to create the actual educational resources. Retirement income calculators (73%), short-form videos and explainers (45%) and interactive forecast tools (36%) were among the most-used educational formats on recordkeepers’ platforms.

Since DCIIA’s launch of the study two years ago, plan sponsor demand and recordkeepers’ internal strategy have ranked as the top two reasons recordkeepers chose to offer retirement income solutions. This year, however, the degree of technical support required to support the offering ranked second among the most influential forces behind retirement income offerings.

Recordkeepers may be less concerned about technology due to more collaboration with strategic partners and middleware providers, according to the study. Among all respondents, 45% of recordkeepers reported having implemented a solution with a strategic partner, and an additional 36% said they were considering doing so.

Takeaways

Recordkeepers that have implemented a retirement income offering cited the following as their top lessons about the experience:

• Retirement income usage has the potential to grow at scale, but a “natural pull” from the industry has not yet occurred. The “pull” must be triggered by adviser advocacy;
• Participant demand may spike, but a solution is not fully implemented until years after it becomes available to participants, due to operational and technical complexity; and
• Product utilization tends to be low unless the solution is positioned as a qualified default investment alternative.

In April, DCIIA surveyed 26 recordkeepers with $13.5 trillion in recordkept assets, serving more than 1.2 million DC plans with 132 million participants.