Their idea is that these products can promise employees a traditional pension security, while freeing up the task to pay for her employers. However, they are still difficulty breaking A barrier.
Only 2% of the plans 401 include a kind of pension or an option of insurance as an investment alongside standard stock choice and the guarantee fund, according to Hewitt Associates, a benefits consulting firm in Lincolnshire, Ill. An additional 3 percent are "very likely" and 17% are "unlikely" to add the category this year, Hewitt said.
Proponents hope that the hearings this week, sponsored by the Treasury and the ministries of labour, will lead to federal regulations that clarify some of the administrative concerns.
"Most people would like to, as they approach the age 50, to have a certain logic of what income level, they would have retired," said Thomas j. Fontaine, global head of the assessments defined in the investment management firm AllianceBernstein, one of the most half-dozen insurance companies and fund managers design these products. "And they will want to know that they will have the income to life."
The products work in two ways. The most common varieties are related to the date funds target - pre-mixed funds which based their strategy of investment on the date, the employee wishes to take his retirement by automatically changing the mixture as the date approaches draws.
In the model of AllianceBernstein, a growing part of the assets of the deadline are transferred to a fund special guarantee begins at the age of 50, 100% in this Fund by five years prior to the date of retirement. Although the product is not complete, Mr. Fontaine said he only expected to ensure a 5% rate of return for life, for an amount of approximately 1% of the assets.
Prudential retirement has a product that combines a variable annuity with a date Fund group target, essentially ensuring against the slowdown of the market, for an amount of 1 per cent. It ensures that each year for the first 20 years of retirement, the investor may withdraw an amount equal to 5% of the assets which were in the Fund of the deadline in its largest year, even if the market has collapsed the year before retirement. After 20 years, Prudential began to pay 5%.
MetLife Personal Pension Builder takes a totally different approach, akin to a deferred fixed annuity. Whenever someone makes a contribution of 401, all or part of money essentially buy a mini-annuity (also known as the phased rent), obtain the interest rate prevailing at the time. Thus, a person who contributed at least every two weeks may be purchase 26 mini-rentes this year.
All these products have in common, is that employees use their assets from 401 to buy guaranteed, constant payment for the rest of their lives after retirement. The cost is usually about 1% of the assets secured, expenses regular 401.
For many people, the added security is worth the price.
"We assure all - disability, our car, our home - but we do not ensure the risk that we might survive our assets,"says Pamela Hess, Director of retirement research Hewitt."." It recommended that people use this kind of security for about half of their 401 property.
There are other concerns, however. Because so many parties are mobile, including the interest rate, the date of retirement and the amount of the contribution - companies worry about the administrative difficulties. It is not simple to have a force work together small-company stock fund.
As a standard annuity, some of the new products depend on a single insurance company remaining in business long enough to continue to pay on guarantees, perhaps for decades.
"How fix you this if it is not the right provider? (A) asked Ms. Hess.
Jody Strakosch, Director of MetLife retirement at the United States products, has a ready answer for this kind of criticism: "MetLife will meet our financial obligations for 140 years."
And John Kalamarides, senior vice president of strategies and retirement solutions at Prudential, said new rules "safe harbor" Washington could relieve the fiduciary concerns of some employers in the choice of insurance companies.
Side, the date of target products are more flexible than annuities. Investors can withdraw their money at any time, even if it means that they paid the additional fee for nothing.
Tongue companies these products say demand is growing. In a survey of 1,300 companies last fall, MetLife found that 44% of employees "want my employer to offer an annuity option" in their open or similar retirement. A spokesman for MetLife recognized that the Declaration may designate rolling on the 401 to an annuity at retirement, as well as to have an investment option.
Stephen P. Utkus, who heads the Center for research of the retirement of the vanguard group - which does not sell any of these new products - said that trying to buy security 401 investment was a mistake. The best approach, he said, is simply to build a bigger nest egg.
"Our customers see having a portfolio itself as a form of security," he said.
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