The New Sponsorship

Defined Contribution’s Seismic Shift

A fresh look at guaranteed lifetime income options

by Matt Gray

Mr. Gray is Head of Employer Markets for Allianz Life Insurance Company of North America. Visit

The passage of the SECURE Act in late 2019 signaled the beginning of what will likely be a seismic shift in the retirement planning industry. With several provisions designed to enable businesses to increase their level of commitment to defined contribution plans, the legislation appears to be a “win-win” opportunity for businesses and plan participants alike. Small businesses can now offer greater plan options and plan participants will start having the option of adding a guaranteed lifetime income option to their employer-sponsored plan portfolio.

But the big question thus far in 2021 appears to be whether or not this will truly bring about the changes intended. The answer appears to be “yes”. Several companies, Allianz Life included, have entered the defined contribution space to offer guaranteed lifetime income to plan sponsors and their participants. While it is too early to gauge interest based on allocations, there is much positive data indicating strong interest in these solutions. This data is not only indicating interest from plan participants, but from plan sponsors as well.

Emerging Interest In Guarantees

Allianz Life has been researching the topic for several years and the findings from our recent studies highlight the importance of the work being done by sponsors, advisors and insurance carriers alike. While not all advisors serve the defined contribution space, there is and will continue to be increasing interest in guaranteed lifetime income* given they will be a plan option for literally millions of Americans. It is an unprecedented opportunity to provide education on the risks within retirement and the critical importance of guaranteed lifetime income as part of an overall retirement plan (and in the case of plan participants within their asset allocation).

Let’s take a closer look at some of the data though. First, consider plan participants. This audience is critical for obvious reasons, as they are the ones that can now select a guaranteed lifetime income option as part of their asset allocation.
The most recent data from Allianz Life indicates the majority of employer-sponsored plan participants are interested in having this option as part of their plan. As part of a recent survey of plan participants, key findings included[1]:

  • 73% of employer-sponsored participants would consider an option that offers guaranteed income for life in their plan if available.
  • 64% of employer-sponsored plan participants stated that market volatility caused by COVID-19 has increased their interest in adding an option that offers guaranteed lifetime income into their plan.
    Employers need to also take note as:
  • 77% said providing an option for lifetime income within their plan would demonstrate their employer has a vested interest in their retirement readiness and wellbeing, and 65% also said this option would increase their loyalty to their employer.

A ‘Distinct Lack Of Confidence’

If we take an even closer look at some data from another Allianz Life study[2], the findings are even more eye-opening. Almost two-thirds of overall respondents (65%) expect that most of their retirement will come from money they have in their employer-sponsored plan. However, there is distinct lack of confidence, as over half (55%) of respondents are worried that money in their employer-sponsored plan will run out during retirement. Gen X angst is clear as 69% are concerned that they will run out of funds, followed by a slightly less nervous millennial cohort at 56%. Forty-five percent of Baby Boomers expressed the same concern over running out of employer-sponsored plan retirement funds.

Gen X angst is clear as 69% are concerned that they will run out of funds, followed by a slightly less nervous millennial cohort at 56%...

But before we even get to the point of the plan participant selecting a guaranteed lifetime income option, it needs to be offered. First, there needs to be buy-in from plan sponsors and they need to understand the value of offering a guaranteed lifetime income option. While the data above indicates the plan participant interest, is there interest with plan sponsors?

Despite pockets of skepticism, plan sponsors are becoming more and more interested, particularly in light of the changes due to the SECURE Act. While new product innovation and portability is helping erase some of the old and negative tapes, it is heartening to see a general change in the overall attitude toward this potentially important product option. Another recent study from Allianz Life backs this belief. The study indicated that plan sponsors overwhelmingly see the value of guaranteed lifetime income options and they are ready to act and offer these options for plan participants.

Some key findings included[3]:

  • 87% of plan sponsors believe providing an option to get income that is guaranteed for life in a retirement plan will lead to greater satisfaction with the plan.
  • 84% of plan sponsors believe an investment option in a retirement plan that can provide guaranteed lifetime income once the participant retires is valuable and can increase financial security in retirement.
  • 85% of plan sponsors that don’t currently offer an investment option with guaranteed lifetime income are at least somewhat likely to consider adding one in the next two years.”

After almost two years since the passage of the SECURE Act, the pieces of the puzzle are starting to come together. However, while there is unprecedented opportunity to better equip millions of Americans to plan for what will likely be a lengthy retirement, there is still much work ahead. Participants need a clearer understanding of the complex and compounding risks associated with a secure retirement and how making guaranteed lifetime income a part of their retirement plan is absolutely critical in addressing them. Plan sponsors need to continue to educate participants on these risks and follow through on their intentions to provide plan participants with tools they need to mitigate them.

Plan advisors also play a critical role here by ensuring that sponsors have the information and solutions they need to do this effectively. Advisors who want to meet the increasing participant and sponsor demand for guaranteed lifetime income need to learn more about the innovative solutions that are being made available and how they work in concert with the other plan investment options to improve participant outcomes. By partnering together, insurers, advisors and sponsors can help participants mitigate the financial risks they face so they can spend their retirement years focusing on what is most important to them.




[1] – Data from Allianz Quarterly Market Perceptions Study (Q2, July, 2021)
[2] – Data from Allianz research conducted in August, 2020.
[3] – Data from Gartner Research Study for Allianz Life (August, 2021)
*Guarantees are backed by the issuing company.