Savings InSight and the Competition

Transcription

1 Savings InSight and the Competition Market Comparison

2 Savings InSight. An innovative retirement readiness tool Savings InSight is unlike any other retirement readiness tool in the marketplace. It s ideal for the individual who knows he or she should be saving for retirement, but, like many, is distracted with day-to-day challenges, intimidated by the myriad of decisions that need to be made to plan for retirement, or keeps putting it off until later which often is too late. 2

3 Innovations Sometimes the simplest ideas are the best. Savings InSight has three key features that, when packaged together, make it an innovative solution. Savings InSight is built on the following features: It transforms your savings plan into a retirement program. Most of the existing retirement planning tools and educational material are well done, informative, and easy to use. But people still do not take advantage of them. With Savings InSight, rational decisions can be made on behalf of the participant, even if he or she is distracted by the daily grind. It converts a typical savings plan into a retirement program and can put participants on a path to a secure retirement. It keeps people on track. Saving for retirement is a marathon, not a sprint. Each year, Savings InSight will review progress toward retirement security and can automatically make changes, as needed. If there is a period of poor investment performance, Savings InSight participants can rest assured adjustments will be made to keep them on the right path to retirement security. No involvement is required by the participant, but the program is flexible and participants can always choose another path. It keeps working after retirement. Most tools stop working once a participant reaches retirement. People live on budgets their entire working life; why not apply the same approach during retirement? Savings InSight has a feature that helps budget savings and pays a monthly paycheck to the retiree over the targeted payout period. When people want to save but can t bring themselves to do it, their retirement funds need to do the saving for them automatically. Jason Zweig, How to Save More For Retirement Without Really Trying. Wall Street Journal, March 29, How does it compare? Here s how Savings InSight compares to the retirement readiness capabilities offered by a composite of other solutions in the marketplace. Feature Savings InSight Competitor Solutions Participant engagement Ease of use Cost Flexibility Periodic adjustments Personalization Retirement adequacy Investments Investment advice Retirement payouts Proactively compels all employees to participate at appropriate levels and changes savings level automatically, as needed. Annual retirement readiness report distributed to all employees. Takes the next step of making the smart deferral that sets the employee on the correct path to having a financially secure retirement; and requires the employee to opt out. Fees not tied to assets, low flat dollar amounts; fees do not increase as account balances grow. Employer can set targets and provide input on a myriad of assumptions. The result is a program that matches the characteristics and expectations of your plan. Annual true-up with automatic adjustments keeps employees on track. Ability to take into account all existing retirement assets and personalize goals to refine a participant s results. Key focus is on helping employees save enough for retirement; employees always know where they are, where they are going, and how to get there. Assumes the use of Target Funds, Balanced Funds, Life Cycle Funds, or Managed Accounts as default investment options; offers the participant and the plan sponsor maximum flexibility and leverages the work done by the sponsor to select and monitor a QDIA. Not intended to be provided, but works in conjunction with existing funds and investment advice collateral. Sets up monthly payments, much like a paycheck, and adjusts them annually depending on the actual account balance. Includes a smoothing mechanism. Lifetime income options are available as well. Caters primarily to participants who like to do their own research, especially the more savvy investors or those closer to retirement, and typically requires the participant to take action. Annual reports are distributed to all employees. Provides useful information, but employees typically must make decisions to achieve target outcomes. Many are tied to fees based on assets which can lead to high costs as balances grow. Little flexibility in setting replacement ratios, inflation, and Social Security assumptions. Quarterly updates and recommendations to help participants keep on track, assets can be moved automatically for those in managed account programs. Access to personal support, robust tools for the sophisticated saver and investor. Key focus is typically on investment management, but provides information on how much is needed for retirement and actions required to achieve goals. Sophisticated investment advice features, automatic rebalancing, adjustments to reflect risk levels. Typically available both online and via representative. Managed accounts can be available at additional asset based fees to the participant. Few providers offer an income stream in retirement, and assetbased fees apply to those who choose to use the draw-down feature. Annuities may be an option. 3

4 Savings InSight and the Competition Commonly asked questions Q. How does Savings InSight interact with your defined contribution (DC) recordkeeper? A. Savings InSight complements your DC recordkeeper. That is, the recordkeeper will continue to be responsible for all tasks it has currently. Savings InSight requires a small number of data elements on an annual basis for current actives, and throughout the year for any new or changed participants. The implementation team will work with HR and payroll to set up the process to transmit this data securely on a standard/ automated basis. If it is deemed that the DC recordkeeper is the best and most efficient resource for this transmission, we will accommodate that method. For retirees, the DC recordkeeper will need to be able to accommodate the distribution of the monthly retiree paychecks, using standard installment payment functionality supported by the vast majority of recordkeepers. The Savings InSight Web experience is an additional way for participants to make contribution deferral elections, but will not eliminate any of the current recordkeeper capabilities. Q. How are investments handled in the Savings InSight approach? A. Savings InSight takes a different approach than most other solutions with respect to retirement readiness. It focuses primarily on helping participants save and defer appropriate amounts. For investments, the Savings InSight approach works best with plans that offer a qualified default investment alternative (QDIA) with automatic investment allocation and rebalancing features. Target Date Funds, Life Cycle Funds, or Managed Accounts are examples of investment options that work best. Plan Sponsors spend a great deal of time and effort to ensure their QDIA is an appropriate investment vehicle; we leverage that work with Savings InSight. The participant always maintains flexibility to select the default option or take complete control of the investments. Just 23% of workers (and 28% of retirees) report they have obtained investment advice from a professional financial advisor who was paid through fees or commissions. Of these workers, 27% followed all, 41% followed most, and 27% followed some of the advice. Ruth Helman, Nevin Adams, Craig Copeland, and Jack VanDerhei, 2013 Retirement Confidence Survey: Perceived Savings Needs Outpace Reality for Many, EBRI Issue Brief, no. 384, March Q. What if we already offer other retirement readiness tools or education, including investment advice and managed account programs? Is Savings InSight still a viable alternative? A. Absolutely. The answer depends on how effective these tools are with respect to helping your employees prepare for a secure retirement. What percentage of your population is accessing the tools/materials? How many are actually saving enough to prepare adequately for retirement? If you ve had these tools in place for a while, but you are not seeing the desired outcomes, then Savings InSight is an ideal option. It can be offered in addition to existing materials and tools. Savings InSight provides a good alternative for those employees who are not capitalizing on the education and tools that are currently available. Compared to the other alternatives, it is low cost and takes minimal time and effort to get good results. Q. Why are updates done annually? What information will employees see more frequently? A. Saving for retirement is a career-long effort. Reviewing results and making adjustments annually allows for an appropriate time period to make changes and keep participants on the right track toward a secure retirement. For those recordkeepers that support single-signon with Savings InSight, participants will see data dynamically updated with each login. Employees will continue to have access to account balance information and investment performance, as well as have the ability to make contribution or allocation changes or apply for loans through the existing recordkeeper and consistent with existing plan provisions. These services are not impacted by the addition of the Savings InSight application. Q. Can the Savings InSight solution work for all employees? A. One of the key positives of Savings InSight is the simplicity of the concept and the approach. The goal of Savings InSight is to increase the number of people who will reach their retirement goals. For those with more complex situations, the Savings InSight solution includes access to a state-of-the-art retirement modeling tool, which offers powerful and educational savings guidance, provides easy one click action elections, and allows participants to further personalize their data and goals. The Web experience also helps guide those participants with complex personal situations in using the modeling tool. It s important to note that a key objective of Savings InSight is to lead people to a place where they can be more comfortable during their retirement years. It is not a guarantee of lifetime retirement income security based on an exact calculation. It s an effective option that will appeal to many. It also complements other retirement readiness solutions that may already be available, utilized, and effective for some employees. For many people, being asked to solve their own retirement saving problems is like being asked to build their own cars. Richard H. Thaler, Shifting Our Retirement Savings Into Automatic, New York Times, April 6,

5 Savings InSight and the Competition Q. How does Savings InSight affect the fiduciary responsibilities of the plan sponsor? A. Savings InSight, does not and is not meant to provide investment advice, and therefore does not take on any fiduciary responsibility from the plan sponsor. It does, however, strengthen the plan sponsor s role as a fiduciary by providing additional information and support to help participants prepare for a secure retirement. Q. I already offer planning tools through my recordkeeper; won t Savings InSight conflict with those offerings? A. While many recordkeepers and plan sponsors offer account balance and projection tools, Savings InSight takes into account Social Security and other retirement income sources to provide your employees with a clear path to retirement security. The combination of robust on-line tools and an annual, easyto-understand retirement update goes above and beyond the services offered by recordkeepers. Savings InSight includes a complete communication program that will clearly outline how to use the tools and how they coordinate with existing recordkeeper resources. Let s get started For more information about Savings InSight or to request a demo, please contact: or hrconsulting@xerox.com Xerox Corporation and Buck Consultants, LLC. All rights reserved. Xerox and Xerox and Design are registered trademarks of Xerox Corporation in the United States and/or other countries. Buck Consultants is a registered trademark of Buck Consultants, LLC. in the United States and/or other countries. BRP2825