Products April 12, 2012

Lincoln Adds Fiduciary Services to LifeSpan Program

Lincoln Financial Group's Retirement Plan Services Business announced enhancements to its LifeSpan customized model asset allocation program. 
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Lincoln now offers plan sponsors the option to engage with Ibbotson Associates, a registered investment adviser and wholly owned subsidiary of Morningstar, Inc., to provide discretionarily managed custom model portfolios with ERISA 3(38) coverage.

ERISA section 3(38) allows defined contribution plan sponsors to hire a registered investment manager and transfer investment-related liability to the investment manager for the oversight of plan investments.

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The LifeSpan program uses an administrative platform that provides consultants and plan sponsors the ability to develop customized asset allocation models for participants, such as target-date and target-risk portfolios, utilizing the investment options from the plan’s existing lineup. The open architecture platform is available for plans in Lincoln’s small-to-large retirement plan program, and to consultants and advisers who wish to act as an ERISA 3(21) investment advice fiduciary or a 3(38) investment manager fiduciary.

 

(Cont...)

The Lincoln LifeSpan program now affords plan sponsors and consultants the option to delegate the fiduciary responsibility associated with developing, monitoring and updating the model portfolios to the investment expertise of Ibbotson Associates. Ibbotson Associates will create a series of model portfolios, including target-date, target-risk and retirement income, based on its patented lifetime asset allocation methodology. Ibbotson will use the plan lineup's investment options, which undergo rigorous analysis, and are carefully selected by plan sponsors and consultants, to implement the diversified model portfolios.

Under this program, plan sponsors or their consultants may choose from a variety of model portfolios designed to accommodate varying participant investment objectives, including:

•  Target-date models;

•  Target-risk models;

•  Retirement income models for investors closer to retirement; and

•  Combination target-risk and date models offering participants a choice of conservative, moderate or aggressive glidepaths based on their years to retirement and risk preference.

 

Data & Research April 12, 2012

Employees' Retirement Confidence Continues to Erode

The hangover from the recession and slow economic growth continues to erode employees' retirement confidence and overall financial wellness, according to the 2012 Financial Wellness Survey by the professional services firm PwC U.S.
Reported by

While there is a slight uptick in the number of employees saving for retirement—67% compared with 65% in 2011—savings remain weak, with 40% of respondents reporting that they are saving less for retirement than last year. As savings dwindle, so does retirement confidence: More than half (53%) of employees plan to retire later than they previously planned (up from 46% in 2011), an increase reported by all age groups younger than 65 years of age.

The top reasons employees expect to delay retirement are because they haven’t saved enough (60%), retirement investments declined in value (34%) or because they have too much debt (26%). Employees also report that they are saving less because of too many other expenses (25%), an increase in expenses (23%) or a decrease in income compared to last year (19%).

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More than one-third (35%) of employees believe they will need to use their retirement plans to pay for expenses other than retirement, such as education or a purchasing of a home, with results even higher for younger employees: 46% of those age 21 to 34 report the likelihood of using money held in retirement plans for expenses other than retirement. Nearly one-third (29%) of respondents have already withdrawn funds from their retirement plans to pay for other expenses.

 

"Employees are being forced to extinguish more immediate fires over retirement saving," said Kent Allison, partner and national practice leader in PwC's Financial Education practice, "which from a long-term perspective is highly risky behavior that can leave employees severely underfunded for retirement as they deal with increased longevity and rising healthcare costs down the road."

Of those employees age 55 to 64 who are planning to retire in the next five years, only about half (51%) know how much income they will need in retirement and slightly more than half have examined whether they are on track to meet their retirement goal (55%)—yet only 19% of all respondents have sought the help of a financial professional.

"As the retirement industry shifts from defined benefit to defined contribution plans, financial responsibility is increasingly falling on the individual plan participant," Allison said. "Despite efforts by employers to improve employee financial literacy around saving and investing for retirement, however, employees report continued discomfort with retirement planning and making investment decisions and short-term financial issues continue to be a significant obstacle to resolving the ever-growing retirement savings deficiency."

 "While auto-enrollment, auto-escalation, and employer matching contributions help increase participation and savings in retirement plans, the survey shows that there are other pressing near-term financial issues that, if left unaddressed, may undermine a company's efforts to resolve the retirement savings problem," Allison said. "We've seen a gradual recognition among companies that a more holistic approach to financial wellness and education can help employees address competing financial goals and issues which, in turn, will not only help keep plan assets dedicated to meeting future retirement needs, but also help free up additional capital to help combat the ever-rising cost of retirement."

 

Other Financial Concerns  

Cash flow and debt management issues continue to top employees' financial concerns, with concerns about not having sufficient emergency savings for unexpected expenses (54%) and not being able to retire on time (37%) more than doubling from last year's results. Almost half (49%) of 1,700 full-time or self-employed adults surveyed find it difficult to meet their household expenses on time, reflected in the continuation of employees using credit cards to pay for monthly necessities they could not otherwise afford (24%).

Employees' financial stress remains high: 61% of employees find dealing with their financial situation stressful, and more than half (56%) report that their stress level related to financial issues has increased over the past 12 months.

"The study is evidence that employees are still very much burdened by day-to-day financial concerns," Allison said.

"These distractions and resulting levels of stress affect employees' health and productivity, and perpetuate a myopic view that becomes an obstacle when it comes to longer-term retirement planning," added David Pouso, a director in PwC's Financial Education practice.

 

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