BlackRock announced Oct. 25 that it will offer a new SunGard program that the money manager says will make lifetime-income retirement options, such as annuities embedded in target-date funds, more attractive to defined contribution sponsors and participants.
“We see broad demand for lifetime income-like products,” Chip Castille, managing director and head of BlackRock's U.S. & Canada Defined Contribution Group, said in an interview. “But there have been implementation issues for sponsors and record keepers. This enables us to pave the last mile of the road to deliver products that meet demand.”
The paving relates to technology from SunGard, called the SunGard Global Network, which Mr. Castille said will address issues that have made executives hesitant to approve annuities within 401(k) plans, whether the annuities are tucked into target-date funds or are stand-alone options.
“Sponsors have a list of things, and getting comfortable with implementation is high up on the list,” Mr. Castille said. “This should allow sponsors to check that box easily.” The program will help sponsors with the automatic processing of individual annuity data and management of trade orders, he said. The program will provide participants with information about projected monthly income, allowing them to see the income effect of their investment choice, he added.
BlackRock is the initial customer for this technology, which SunGard is making available to all record keepers, Mike Vogel, SunGard's senior vice president for wealth management, said in an interview.
Mr. Vogel said annuity products provide administrative challenges for DC record keepers, including the need to keep track of many funds, making annuity calculations and communicating the calculations to participants. With the SunGard technology, “we have centralized the heavy lifting,” he said. “It should work for everyone with an annuity target-date-based product or any product.”
Mr. Vogel described the technology as creating an “income window” for record keepers, allowing them to integrate retirement income funds easily into a sponsor's administration and transactions processes.
Annuities within 401(k) plans have been a tough sell. Providers, including Prudential Financial and Genworth Financial, have achieved little success in their annuity-within-401k offerings.
In October 2007, Barclays Global Investors, which was later acquired by BlackRock, introduced SponsorMatch, an annuity embedded within a target-date product for DC plans. So far, there have been no customers. The annuity provider for the product is MetLife.
Mr. Castille said SponsorMatch has been renamed LifePath Retirement Income to provide a greater brand identity with BlackRock's LifePath series of target-date funds. “We wanted the name of the product to better reflect the attributes of the product,” he said.
