The Evolving Defined Contribution Landscape: Alts, ESG and Income in DC
Retirement thought leaders discuss key components of retirement readiness: alternative investments, ESG and income in retirement.
As American workers become increasingly dependent on defined contribution plans, sponsors need to adopt a more modern and nimble approach to allow for the best retirement outcomes. To make DC plans more effective, plan sponsors, providers, and consultants will need to prioritize providing personalized retirement income solutions for participants, while offering professional investment management at a cost that’s competitive with what large institutions pay. To get a clearer view of the current DC landscape, PGIM surveyed more than 100 plan sponsors and a host of leading Outsourced Chief Investment Officer (OCIO) providers in the United States, looking specifically at three key areas. Here is what we found.
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Part 1: The Expanding Role of OCIOs
The use of OCIOs in the DC market remains an evolving area in terms of both services provided and desired, and adoption is in the early days, with more interest from mid-size DC plan sponsors. Our research captures insights and offers a window into the current landscape of the OCIO arena to help better inform DC plan sponsors, DC consultants and OCIO managers alike.
Part 2: Alternatives & ESG as Long-Term Solutions
Sophisticated investors understand the benefits of unique strategies to grow wealth and manage risk. Given that plan sponsors and consultants have the ability to bring this approach to the typical participant, at institutional pricing, there is a compelling case to be made that they try and do so. But our proprietary research shows that most DC plan sponsors do not offer alternatives as part of their target date funds.
Part 3: The Holy Grail of DC: Income in Retirement
Our research shows a strong belief among plan sponsors that there is a need to offer retirement income solutions through a technology-enabled customized solution for pre-retirees and retirees. We dive deeper into our retirement-income findings and discuss how DC plan sponsors can take steps to help facilitate and increase employee understanding of retirement readiness.
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Filling the Gap with OCIOs: A Roadmap for Plan Sponsors
As the DC market continues to evolve, many plan sponsors are looking at innovative solutions to support their participants' retirement savings needs.
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PGIM does not establish or operate pension plans.