BlackRock CEO Sees Annuities as Retirement Plans' Future

BlackRock said then that Brighthouse Financial and Equitable would provide the lifetime income program options.

Fink said in his annual chairman’s letter to investors that the program will launch this month with 14 retirement plan sponsors as customers and 500,000 participants in the sponsors’ plans.

The participants have $25 billion in target date funds, or $50,000 in target date funds per participant.

The program will help ease the financial uncertainty that the shift to defined contribution plans, from defined benefit pension plans, has created for retirement savers, Fink said.

The future: Fink said during the conference call that anxiety is a problem throughout the investment world, not just for retirement savers.

“There is still a record amount of cash on the sidelines, and money market fund balances are now approaching $9 trillion,” Fink said. “I think this stems from fear and uncertainty, but it’s hard to achieve retirement or long-dated objectives by holding cash.”

Fink said increased longevity makes investment uncertainty especially painful for retirees.

Individual savers “have to first build up the retirement estate, which in and itself is a formidable challenge,” Fink said. “Then even as they have this sizable savings at retirement, there’s not much guidance about how to spend these savings.”

Morningstar analysts suggested in a recent report that growth prospects for defined contribution plans with built-in annuitization options are uncertain, partly because of employers’ concerns about program fees, implementation and performance.

But Fink predicted that many employers will add lifetime income options once they see how the launch of BlackRock’s program goes.

“Many clients wanted to see actual implementation of these plans,” he said. “The conversations are also now beginning in Europe and other places, too. I do believe it’s going to transform BlackRock as a leader in retirement benefits.”

Credit: Bloomberg