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Fidelity Joins Lifetime Income Focus Frenzy

Retirement Income

In a move likely to spur an increase in adoption of lifetime income solutions among retirement plans, Fidelity Investments has unveiled plans to launch a retirement income product.

Fidelity has announced Guaranteed Income Direct, a retirement income product that allows individuals to convert a portion of their 401(k) or 403(b) savings into an annuity “to provide consistent, pension-like payments throughout retirement,” according to a press release

The firm says that Guaranteed Income Direct enables employers to provide their workers with a straightforward option of an immediate income annuity, with institutional pricing and offered by the insurer of their choice, combined with support and digital tools to help workers determine the amount of guaranteed income that is right for them. 

Individuals have the flexibility to convert any amount of their retirement plan savings, regardless of where their money is saved (mutual funds, etc.) to guaranteed retirement income, based on their personal needs. Any savings that are not converted to an annuity can remain in the workplace savings plan—all of which is integrated with Fidelity’s employee benefits portal, which also includes education and support from Fidelity to help employees as they consider their options.

Fidelity says that the increasing demand for annuities as a retirement savings distribution option is driven by several factors:

  1. The press release claims that employers feel a greater responsibility to offer their employees the ability to turn some, or all, of their retirement savings into a reliable source of steady income. 
  2. Recent research[i] indicates that 78% of workers are interested in putting some of their retirement savings into an investment option that would guarantee them monthly income when they retire and help ensure they don’t outlive their savings. 
  3. The passage of the SECURE Act has reduced the fiduciary risk for employers and made it easier for them to provide annuities as a retirement plan distribution option.

The program is scheduled to launch for select clients in the first half of 2022, with “broad availability” slated for the second half of 2022.

Retirement Income—An Expanding Field 

The expansion of retirement income options has been a focus for a number of firms in recent months, though up till now most of the new introductions have revolved around a design that incorporates the income option with a target-date wrapper. In October BlackRock garnered some headlines with news that not only was it building annuity contracts into a target-date fund series, but also that it had already lined up five large plan sponsors (with some $7.5 billion in assets) to implement the option as a default. Earlier this year there was an announcement of a consortium of providers (American Century Investments, Lincoln Financial Group, Nationwide, Prime Capital Investment Advisors, SS&C Technologies, Wilmington Trust, N.A. and Wilshire) that had collaborated on a new in-plan target-date fund series with guaranteed income for life baked in. One that is also purportedly “portable among major recordkeepers where Income America 5ForLife is available”). 

Also in October, Nationwide, in partnership with the Capital Group and Annexus Retirement Solutions, launched a new target date fund series, the NCIT American Funds Lifetime Income Builder Target Date Series, which incorporates a fixed indexed annuity with a guaranteed lifetime withdrawal benefit created by Annexus that builds on Nationwide’s suite of in-plan guarantees. More recently Lincoln announced that its Pooled Employer Plan (PEP) would offer lifetime income option (see New Lincoln Financial PEP to Offer Lifetime Income Option).


[i] Based on 744 responses as part of the Employee Benefits Research Institute’s 2021 Retirement Confidence Survey.

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