BlackRock launched its LifePath Paycheck retirement income offering this week, with utility company Avangrid becoming the money manager’s first client.
Avangrid will add the annuity option for the more than 70% of employees in its $2.4 billion 401(k) plan using BlackRock’s target-date funds.
BlackRock executives said the offering will go live shortly as well for workers paying into the defined contribution plans of Adventist HealthCare Retirement Plans and Tennessee Valley Authority Retirement System — the vanguard of an initial group of 14 retirement plan sponsors with $27 billion in combined target-date assets and 500,000 participants.
Mark McCombe, BlackRock’s vice chairman, said at a news conference April 24 marking the official start of the LifePath program, and called it the “first day of a very, very important journey,” with the potential to revolutionize the retirement industry.
Workers who choose the LifePath Paycheck option will start allocating to a new asset class called “lifetime income” the year they turn 55, with that pool likely to grow to roughly 30% of their plan savings over the subsequent 10 years.
As early as age 59½, participants will be able to tap that pot to purchase annuity contracts issued by the insurance companies with which BlackRock is partnering — Equitable and Brighthouse Financial.
Paul Visconti, Avangrid’s senior director of total health and retirement programs, said BlackRock makes it easy for employees to secure lifetime income from a target-date fund structure with which they’re already comfortable. At the same time, the program allows participants to remain in the company plan after retirement as opposed to taking a lump sum and looking to make other arrangements.
“They don’t have to think about going to a different type of fund outside of the plan or something they’re not used to,” he said.
Employee money that goes toward annuities will no longer be managed by BlackRock, but the offering should allow them to keep their money in their company plans longer, noted Anne Ackerley, managing director and head of BlackRock’s retirement group. And even with 15% of target-date industry funds at present, LifePath Paycheck should help BlackRock pick up further market share, she said.
BlackRock Chairman and CEO Larry Fink earlier this year told clients and CEOs in his annual letter that the U.S. needed the financial equivalent of a moonshot to avert a looming U.S. retirement crisis.
