2015 Retirement Webinar Series. Prepared by Aon Hewitt Retirement and Investment

Transcription

1 2015 Retirement Webinar Series Prepared by Aon Hewitt Retirement and Investment

2 2015 Hot Topics in Retirement Results Rob Austin, Director of Retirement Research Byron Beebe, US Retirement Market Leader Virginia Maguire, Director of Retirement Product & Solutions Prepared by Aon Hewitt Retirement and Investment

3 About the Survey Conducted in the fall of Data is based on survey responses from nearly 250 plan sponsors employing 6 million individuals. Ninth installment of this annual survey. January

4 Three Main Themes Nearly all companies are creating or expanding the focus on the financial wellness of their employees. Defined benefit plan sponsors are monitoring and eliminating risk from pension plans. Defined contribution plans are leveraging size and scale to help participants improve their retirement outcome. January

5 Financial Wellness January

6 The #1 Initiative in 2015: Focusing on Financial Wellness 93% are very or moderately likely to create or expand financial wellness programs in a way that extends beyond retirement decisions 49% 67% feel the significance of financial wellness has become more important within the last 24 months will communicate the link between financial stress and health and well-being January

7 Approaches to Financial Wellness and Physical Well-Being Have separate financial wellness and physical wellbeing approaches 34% 38% Have a physical wellbeing initiative, but no financial wellness strategy Include financial wellness in a combined program that includes physical health 25% 3% Have a financial wellness strategy, but no physical wellbeing initiative January

8 Financial Wellness Services, Tools, and Education Basics of financial markets, simple investing, etc. 41% already offer 27% very likely to add in 2015 Healthcare education & planning (HSA, retiree medical, etc.) 32% already offer 38% very likely to add in 2015 Financial planning (including insurance, taxation, estate, etc.) 29% already offer 23% very likely to add in 2015 Budgeting (managing dayto-day finances, etc.) 26% already offer 13% very likely to add in 2015 Debt management (credit counseling, credit score management, etc.) 25% already offer 9% very likely to add in 2015 Assistance with saving for specific life stages (home, college, etc.) 22% already offer 15% very likely to add in 2015 Very likely percentages are among those who do not already offer. January

9 Focus on Defined Benefit Pension Plans January

10 Prevalence of Different Types of Defined Benefit Plans Have an open, ongoing pension plan 26% 26% Do not have a pension plan Have a frozen pension plan 23% 25% Have a closed pension plan January

11 Defined Benefit Plan Actions Of open plans are very likely 14% to close in 2015 Of open and closed plans are 9% very likely to freeze in % Of all DB plans are very likely to terminate in % Will reduce benefits but continue to offer a DB plan January

12 Changes to Defined Benefit Plan Assets Conduct an Asset-Liability Study 45% 24% Match Assets with Liabilities 16% 36% % are very likely to do so in % are very likely to change in 2015 Daily Monitoring of Funded Status Move to Glide Path 12% 26% 22% 26% % are very likely to add in % are very likely to change in 2015 Very likely percentages are among those who do not already have. January

13 Defined Benefit Plan Settlement Activity 47% 21% Are very or moderately likely to have a temporary lump sum window for terminated vested participants in 2015 Are very likely or moderately likely to purchase annuities for some participants in 2015 Actions to Prepare for Lump Sums and Annuity Purchases Increase HR staff to prepare for additional calculations and questions 16% 66% Hire outside vendor to assist with calculations and/or handle calls Carefully review data to be used in the benefit calculations 88% 86% Provide written communication to participants in advance Percentages shown are the sum of those who answered Very Likely or Moderately Likely January

14 PBGC Premiums and Mortality Tables 63% Plan on taking actions now to reduce future PBGC premiums 19% Plan on increasing cash contributions over next 2 years 18% Performed a mortality study in % Plan to perform a mortality study in 2015 January

15 Focus on Defined Contribution Plans January

16 Leveraging DC Plan Size and Scale to Aid Participants Institutional/Separately Managed Funds 30% 16% 2014 Of the rest, 10% are very likely and 22% are moderately likely to change Change Fund Options to Reduce Costs 34% 27% Of the rest, 34% are very likely and 34% are moderately likely to change Add a Tier of Index Options Move to Customized Target-date 18% 22% Funds 12% 17% Of the rest, 8% are very likely and 24% are moderately likely to add Of the rest, 3% are very likely and 21% are moderately likely to move Likely percentages are among those who do not already offer. January

17 Actions Related to Plan Fees and Expenses Review the Total Cost of the Plan 47% recently reviewed. In 2015, 71% are very likely to and 21% are moderately likely Hire a Third-Party to Benchmark Cost 36% recently reviewed. In 2015, 28% are very likely to and 25% are moderately likely Have Participants Share Less of the Cost 17% recently changed. In 2015, 5% are very likely to and 14% are moderately likely Change to Fund-of-Fund or Manager-of-Manager 12% recently changed. In 2015, 2% are very likely to and 14% are moderately likely Restructure Administrative Fees More Equitably 24% recently changed. In 2015, 18% are very likely to and 28% are moderately likely Have Participants Share More of the Cost 7% recently increased. In 2015, 3% are very likely to and 15% are moderately likely Likely percentages are among those who do not already offer. January

18 Products Providing Savings and Investments Are Growing Online Investment Guidance 56% 69% Phone Access to Financial Planners 35% 53% % are very likely to add in % are very likely to add in 2015 Managed Accounts Online Third-Party Advice 39% 47% 44% 49% % are very likely to add in % are very likely to add in 2015 Very likely percentages are among those who do not already offer. January

19 Minimizing Leakage from Defined Contribution Plans 21% 56% Very Important Moderately Important 77% Feel minimizing leakage is important 18% 39% 57% Very Likely Moderately Likely Are planning on addressing leakage Most Prevalent Actions Most Likely Actions in Allow terminated vested participants to continue loan repayments 39% 2. Implement waiting period between payoff date and new origination 27% 3. Reduce the number of loans available to participants 9% 1. Increase education on the impact of loans on retirement income 86% 2. Study demographics of participants who take a loan 68% 3. Target communication to those taking out a loan 58% Percentages are among those who do not already have features in place. January

20 Converting Savings to Lifetime Income 65% Feel supporting the process to have participants convert balances to lifetime income is very or moderately important 47% Are very likely or moderately likely to address ways to encourage lifetime income in 2015 Prevalence of Tools and Products to Convert Savings to Lifetime Income In-plan annuity or insurance product 7% 30% In-plan managed account with drawdown 70% Online tools or apps to help see how much to spend 10% Facilitation to purchase annuities outside plan 35% Distribution option to receive monthly payments Percentages shown are those who answered Already Offer January

21 Barriers to Adding In-Plan Income Solutions Operational or 43% Administrative Concerns Waiting to See 43% Market Develop 38% Fiduciary Concerns Participant 37% Utilization Concerns Percentages shown are those who answered Major Barrier January

22 Employer Stock in Defined Contribution Plans 60% Are very likely to review the fiduciary considerations of having 68% employer stock in the plan 31% Are very likely to communicate on the specific considerations of investing in employer stock of publicly-traded companies allow participants to invest in employer stock within the DC plan Reduce Threshold of Future Contributions 9% completed recently 10% very likely 30% moderately likely Reduce Threshold of Current Balance in Stock 8% completed recently 7% very likely 30% moderately likely Likely percentages are among those who do not already have thresholds in place. January

23 Questions and Answers January

24 Three Main Themes Revisited 1 Financial wellness tools and services are expanding 2 Defined benefit pension plan sponsors are mitigating risk 3 Defined contribution plan sponsors are adding features to help participants January

25 Upcoming Events and Contact Us Upcoming Webinar February 18, 2015 Asset Allocation Through Changing Market Environments Contact Us For any additional questions, please contact us at January

26 About Aon Hewitt Aon Hewitt empowers organizations and individuals to secure a better future through innovative talent, retirement and health solutions. We advise, design and execute a wide range of solutions that enable clients to cultivate talent to drive organizational and personal performance and growth, navigate retirement risk while providing new levels of financial security, and redefine health solutions for greater choice, affordability and wellness. Aon Hewitt is the global leader in human resource solutions, with over 30,000 professionals in 90 countries serving more than 20,000 clients worldwide. For more information, please visit aonhewitt.com. Aon plc All rights reserved. January