Products February 5, 2024

PGIM Unveils Retirement Confidence Index

The RetireWell Confidence Index ranks worker responses on a scale of six confidence levels.

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PGIM announced the launch of a new retirement confidence index on Monday that allows plan fiduciaries to access the financial and retirement confidence of some 300,000 U.S. workers.

The RetireWell Confidence Index is built from a dataset with responses from workers who have taken an online financial wellness assessment, and index interprets results on a scale of six confidence levels: very high; high; above average; below average; low; and very low.

“The index is an aggregation of the responses over time, where it removes any of the effects related to things like income, [because] individuals who have higher incomes are much more confident,” says David Blanchett, the head of retirement research at PGIM DC Solutions.

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The index controls for the demographic factors related to confidence, including age, income, gender and marital status, says Blanchett, who helped to conceive of and supported developing the index.

Although individual sponsors are not able to access data specific to their plans, using the data may inform “a plan sponsor [regarding] how their participants are feeling about retirement versus national averages,” Blanchett says. “This [dataset is] trying to capture things that you wouldn’t normally get from the traditional quarterly report that shows you how your participant balances have changed over time.”

The current question used to estimate financial confidence asks respondents, “Overall, how are you feeling about your finances?” The corresponding four possible responses are: Stressed; OK; Confident; and I’m not sure, according to PGIM.

For retirement confidence, PGIM asks, “Do you think you’ll have enough savings for the retirement you want?” The three potential responses are: “Yes, I think I’ll have enough”; “I don’t think so, but I’m trying!”; and “I’m not sure.”

PGIM’s current retirement confidence index data is as of December 31, 2023.

In the most updated data sagging participant retirement confidence shows the overall confidence grade is “below average,” identical to the previous quarter and the same as one year ago.

Three years ago confidence levels were above average and five years ago the index grade was also below average, according to PGIM.

“As the markets have rallied [in 2024], and if the markets keep going up, I would imagine we’d see more and more improvements over time,” to retirement confidence, Blanchett says. “The perceptions of risk are changing a little bit, where people are more concerned about things like inflation than they have been historically.”

Data for the PGIM RetireWell Confidence Index is based on responses to an online financial wellness assessment offered by Prudential Financial since April 20, 2017. The questionnaire consists of approximately 25 questions, and more than 300,000 responses have been collected across three different versions since it was introduced. Historically, the assessment was primarily accessed by individuals either through Prudential’s recordkeeping platform or group benefits services.

Deals & People February 2, 2024

Aon Notes ‘Terrific Opportunities’ for M&A

Company sees strong M&A pipeline on the heels of announcing its NFP acquisition.

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Aon Plc remains a buyer across its business units of wealth, retirement, health and risk, according to senior executives on its fourth-quarter earnings call Friday.

In response to questions about merger and acquisition potential, the firm’s leadership noted, first, a focus on using capital for stock buybacks, then discussed the potential for further M&A. Aon’s CEO and CFO both made the comments even as they gave updates on the December 2023 agreement to purchase wealth and retirement advisory NFP Corp. for $13.4 billion.

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That deal will bring NFP’s 7,700 employees, including retirement advisers, and $2.2 billion in revenue to Aon. The transaction is still expected to close in mid-2024, executives said, but for financial purposes, the firm is “conservatively” forecasting its close in mid-2025.

In its Q4 earnings, Aon reported 7% cash flow growth from operations, reaching $3.44 billion, and a free cash flow increase of 5% to $3.18 billion. When asked about the potential for further M&A, CEO Gregory Case responded that the firm sees opportunities.

“We continue to look, as we think about deployment of capital, and obviously [stock] buyback is at the top of the list, given how undervalued we are, but we are looking across the board, even as we think about the closure on the NFP front,” Case said. “We see opportunities around the world, and our pipeline continues to be very strong.”

CFO Christa Davies elaborated, noting a separate acquisition made in March 2022 of actuarial technology and software firm RPC Tyche.

“We allocate capital based on return on capital, and we definitely—based on the free cash flow outlook in 2024 and the long-term—see we are significantly undervalued, and we will disproportionately allocate that free cash flow to buyback in 2024,” Davies said. “But we do have a great M&A pipeline, in areas like data analytics—if you think about the acquisition of Tyche, a fantastic acquisition in the area of data analytics—in areas like health. There are a number of areas that are front and center for clients … we’ll continue to look at everything, and there’s certainly some terrific opportunities out there. But we’ll certainly continue to be very disciplined on return on capital.”

Davis noted, in response to a separate question, that the firm expects the NFP acquisition to “accelerate” the firm’s long-term free cash flow, adding $300 million in 2026 and $600 million in 2027.

Aon reported that its wealth solutions business, which works with employers, fiduciaries and investment officers, saw 5% growth in Q4, reflecting “strong growth in retirement, which includes growth from ongoing pension risk transfer projects and work to help clients address changing regulatory requirements.”

The division currently has $4.4 trillion under advisement, with the NFP deal intended to access the middle market in part by leveraging Aon’s distribution network.

“We are incredibly excited about both the top and bottom growth potential for NFP, given our complementary businesses and expected synergies,” Case said on the call.

NFP will continue to operate as an independent company from Aon, with Doug Hammond remaining its chairman and CEO.

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