BlackRock: Participant Education Remains Biggest Hurdle for Retirement Income Adoption

Retirement income solutions within defined contribution plans have evolved in response to a trend of making DC plans more pension-like.” To that end, BlackRock launched its own target-date fund series in 2024, LifePath Paycheck.

The TDF has surpassed roughly $30 billion in assets and been adopted by 10 to 11 plan sponsors since launching in 2024, with another five plans expected to join over the next year.

But Nick Nefouse, managing director and global head of retirement solutions and head of LifePath at BlackRock, says adoption of LifePath Paycheck should not be measured simply by participant enrollment, because the strategy is typically implemented as a plan’s qualified default investment alternative. He says the firm’s focus has shifted from securing recordkeeper and plan sponsor support to educating participants about guaranteed income features embedded in the plan.

“The biggest hurdle right now is participant education,” he says. “If you hear something one time, you’re not going to make a behavioral change. … You have to hear it multiple times in multiple different venues.”

Plan Participant Adoption

Nefouse says participant adoption centers on whether participants elect to convert part of their retirement savings into guaranteed lifetime income.

“The QDIA, everybody invests in the QDIA,” he says. “The way that we’ve designed this, … the insurance component stays fully liquid during accumulation and accumulates just like any other asset would in the portfolio.”

According to Nefouse, BlackRock always expected participant take-up of the annuity feature to develop gradually, as workers require education and familiarity with retirement income concepts long before retirement.

To support participant decisionmaking, BlackRock offers a digital education platform called MyLifePath, which allows workers to model retirement-income scenarios and explore the guaranteed-income option available within the fund.

The company reports that traffic to the platform increased by more than 300% after education campaigns and grew roughly 60% quarter over quarter.

Nefouse says those engagement metrics are more meaningful indicators of future adoption than early annuitization rates.

Another consideration during the design process was creating the annuity feature as an opt-out feature for plan participants, instead of something they have to opt in for.

However, most plan sponsors have been more comfortable requiring participants to actively elect the annuity feature, according to Nefouse.

“Many [plan sponsors] start talking about it,” he says. “They like the idea of an opt–out, and then when it becomes the practical time to select, they want an opt–in.”

Sponsor Interest

The employers showing the strongest interest in LifePath Paycheck tend to be larger employers with older workforces and histories of offering defined benefit pension plans, according to Nefouse.

Many are seeking to recreate some of the retirement security traditionally associated with pensions without assuming pension liabilities on their balance sheets.

“We tend to have more of those legacy DB-plan firms,” he says, pointing to manufacturing and other established industries as examples.

Currently, BlackRock offers LifePath Paycheck through recordkeepers Fidelity Investments, Bank of America Corp., Merrill Lynch and Voya Financial Inc.

As participant interest grows, BlackRock has also expanded what Nefouse described as a “white–glove” service model for workers considering the income option.

The firm enhanced its dedicated participant support resources after hearing from sponsors that many employees wanted to discuss retirement-income decisions with a person rather than navigate the process entirely online.

Since expanding those resources, calls have increased by more than 70%, according to Nefouse.

He says he expects broader adoption of guaranteed-income solutions to occur gradually rather than through a rapid acceleration. A key milestone, he noted, will come when the strategy reaches a three-year track record, a threshold that many fiduciaries use when evaluating investment options.

Over time, however, he says retirement-income features could become commonplace in defined contribution plans.