Data & Research September 13, 2024

Enhancing the Retirement Plan Digital Experience

J.D. Power finds digital channels are often lacking for participants.

Reported by

As retirement plan customers increasingly rely on digital channels for managing their financial futures, the quality of those digital experiences has become crucial. However, according to the newly released J.D. Power 2024 U.S. Retirement Plan Digital Experience Study, most retirement plan providers still have significant room for improvement.

Only 21% of retirement websites and mobile apps meet customer expectations for delivering a valuable digital experience, far behind other industries and potentially jeopardizing assets under management, the researchers found. For plan advisers, this could provide an opportunity to work more closely with clients and their participants.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

“The first and most important thing advisers should be doing when it comes to digital is to get familiar with the tools and resources their firms provide to clients,” says Craig Martin, managing director and global head of wealth and lending intelligence at J.D. Power. “This will allow them to spotlight capabilities that are aligned with their clients’ needs.”

He says advisers should also be asking participants about their digital usage habits and experiences.  Having a good understanding of what participants are using and not using in the site, or App, can spotlight knowledge and awareness gaps that the adviser could help fill that will increase the perceived value of the digital experience.

Financial wellness has become a key focus for many retirement plan providers, who aim to offer more than just basic financial products, according to Martin. However, without strong digital engagement, many customers fail to recognize or appreciate these efforts. This disconnect results in wasted resources and missed opportunities for business expansion, as providers struggle to communicate the value of their offerings to digitally disengaged users, Martin says.

On the plus side, J.D. Power did find that overall satisfaction with retirement plan digital experiences has increased to 703 (on a 1,000-point scale), an 18-point improvement from 2023. But those platforms still lag behind other sectors such as insurance, automotive finance, utilities, and banking. Retirement plan apps and websites struggle with ease of use and finding information—critical aspects of a successful digital experience, according to the consumer research firm.

J.D. Power’s digital experience hierarchy rates retirement plan websites and apps across three performance levels: foundational, functional, and valuable. Foundational experiences prioritize design, security, and access to key information, while functional experiences focus on usability and navigation. Valuable experiences go further by offering personalization and proactive engagement. According to the study, 21% of retirement plan digital experiences do not meet the basic criteria for a foundational experience, and only 21% deliver what would be considered a valuable experience.

There is a clear connection between strong digital offerings and customer loyalty, according to the researchers. The study shows that customers are nearly twice as likely to retain their assets with a provider during a job change if the provider delivers a valuable digital experience. Furthermore, 40% of customers are more likely to roll over funds from other retirement accounts when they enjoy a superior digital experience.

The study is based on responses of 5,638 retirement plan participants and was fielded from May through July 2024.

Data & Research September 13, 2024

DC Plans in US Need to Cover More Workers, TIAA Finds

A study of global pension systems also suggests that workers should be required to join 401(k)s and other retirement programs.

Reported by

Workplace retirement plans have a lot of money: Defined contribution assets in the U.S. stood at $11.1 trillion at the end of the year’s first quarter, up 5.3% percent from year-end 2023, per the Investment Company Institute.

Still, according to a retirement security study by the TIAA Institute, the research arm of TIAA, the U.S. retirement system is spotty for workers. The reason: There is no universal enrollment in employer-provided plans, as is often the case elsewhere.

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

Globally, the average retiree will spend roughly two decades in retirement, double the tenure from 50 years ago. In the U.S., since Social Security began 90 years ago, life expectancy has risen 17 years.

“In our vision for the future, all U.S. workers are automatically enrolled into a robust, cost-efficient retirement plan,” commented Bret Hester, general counsel and head of TIAA’s government relations and public policy group, in the report. “Workers who don’t choose their own investments would be defaulted into a well-designed investment solution that can easily be converted into a guaranteed income stream or other payout option at retirement.”

In the U.S., defined contributions plans are now predominant in the private sector, although participation is not often mandatory and not all include employer matching contributions. “Because DC plans do not automatically convert retirement savings into a guaranteed income stream, and most participants do not voluntarily purchase annuities, the only source of guaranteed lifetime income for most retirees is now Social Security,” the report noted.

Meanwhile, the number of retired Americans is larger than a half-century ago, and so is the time spent in retirement, as longevity has risen. In 1974, when the Employee Retirement Income Security Act, or ERISA, was enacted, the average male worker retired at 68.5 and had 9.6 years in retirement. In 2024, the average worker retires at age 65.2 and spends 18 years in retirement.

The study covered Australia, Canada, the Netherlands, Singapore, Sweden, the U.K and the U.S. The U.S., the U.K., Canada and Australia have individual choice systems for workplace retirement plans, in which participants manage their own investments and risks, including longevity risk, which means some may opt not to participate in their employer’s plan, if one is offered.

The Netherlands, Singapore and Sweden have collectively managed plans, in which employers require workers to participate, limit individual choice and share risk across all participants. All have a supplement in government-run, compulsory plans, such as Social Security in the U.S.

In the U.S., strong laws ensure transparency in 401(k) plans and the like. The report highlighted this, evidently to underscore that these were trustworthy products.

Some 54% of workers have access to employer-sponsored plans. “Policymakers have already made efforts to expand retirement plan coverage, although a federal mandate for employers to offer a plan has yet to gain approval,” the study pointed out.

But the lack of required participation has a downside. As the report stated, “the low rate of annuitization at retirement implies that many participants are missing out on risk sharing that could potentially boost their income in retirement.”

The report warned that the “voluntary, employer-centric nature of the workplace system also leads to variation in the quality of workplace retirement plans.”

«