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Home  > Business/Finance  >  Financial Services  >  Fund Management

401k and Defined Contribution Plans - US

Published Date: October 2007
Published By: Mintel International Group Ltd.
Order Code: R560-2967
 
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SCOPE AND THEMES
What you need to know
Abbreviations and terms
Abbreviations
Terms
EXECUTIVE SUMMARY
Industry overview
Market overview
Figure 1: DC plan assets, 1996-2006
Small businesses
Automatic enrollment
Investment trends
Recent legislation
New products in the marketplace
The Mintel 401(k) consumer survey
Figure 2: Attitudinal differences between 401(k) owners and non-owners, January-October 2006
MARKET DRIVERS—ENROLLMENT AND INVESTMENT ISSUES
Enrollment and participation rates stagnating
Impact of automatic enrollment
Figure 3: Employer reasons for not adopting automatic enrollment in the future, 2007
Permanent status for the Roth 401(k)
Figure 4: Reasons for employers not adopting Roth 401(k) in near future. February 2007
Popularity of IRAs and impact of rollovers
Emergence of the CIT
Inroads made by ETFs
Lifecycle and lifestyle funds re-energized by PPA
Figure 5: Percentage of assets in lifecycle and lifestyle funds, IRAs and employer-sponsored DC plans, 1997-
2006
DC plans using advisors as intermediaries
Figure 6: Type of advisor used by employers to evaluate investment options, 2007
Figure 7: Items of importance in selecting or evaluating a DC plan provider (ratings), 2007
Figure 8: Default investment using automatic enrollment, 2007
Investment-only business
Rising awareness of healthcare costs as part of retirement savings
Matching contributions
Automatic enrollment
“Prepackaged” advice
Targeting efforts toward the next generation of retirement savers
MARKET DRIVERS—DESIRED PLAN BENEFITS AND USE OF ADVISORS
What employees care about
Figure 9: Employees: Importance of benefits offered, February 2007
Figure 10: Employers: Importance of benefits offered, February 2007
Figure 11: Employees: Likelihood of switching to company with retirement plan, February 2007
Figure 12: Employees: Importance of matching contribution, February 2007
Figure 13: Employees: Matching contribution offered, February 2007
Participants’ use of advisors and need for advice
Figure 14: Employees: Have a professional financial advisor, February 2007
Figure 15: Employees: Services of professional financial advisor, February 2007
Figure 16: Employees: Rely on outside experts, February 2007
What employers are doing about advice
Figure 17: Employer: Company preference for usage of guidance/advice, February 2007
Figure 18: Employer: Reasons for not offering investment guidance/advice, February 2007
Figure 19: Employer: Entity that should be most accountable for selecting and monitoring investment options in
a retirement plan, February 2007
Figure 20: Employer: What is offered to help transition employees, February 2007
MARKET DRIVERS—LEGISLATIVE DEVELOPMENTS
403(b)s to be more like 401(k)s
Automatic IRAs
Proposal to make index funds mandatory for 401(k)s
Decline of the defined benefit plan
What plan sponsors are doing
Figure 21: Reasons not to offer employee funded retirement plan in next two years, February 2007
Figure 22: Length of time with current plan administrator, February 2007
Figure 23: Changes to plan in past 12 months, February 2007
Figure 24: Types of changes to 401(k) plans in last 12 months, February 2007
OTHER MARKET DRIVERS
Tax-exempt workers
Small businesses
Growing popularity of socially responsible funds
Behavioral finance begins to play a role
Non participation and financial behavior
Figure 25: Retirement confidence survey, 2007
Figure 26: Expected standard of living during first five years of retirement, 2007
MARKET SIZE AND SEGMENTATION
Types of pension plans and market penetration
Figure 27: Defined contribution plan assets, 1996-2006
401(k)s
Figure 28: Top defined contribution plan managers, 2006
Mutual fund classes
Figure 29: Mutual fund retirement assets by type of account and fund, year end 2006
Figure 30: DC record keepers, by total record kept assets, 2007
Figure 31: DC record keepers, by percentage increase in record kept assets, 2005-06
Figure 32: DC record keepers, by number of record kept plans, 2007
Figure 33: DC record keepers, by total record kept participants, 2007
Figure 34: DC record keepers, by record kept assets in 401(k) plans, 2007
Figure 35: DC record keepers, by record kept assets in 403(b) plans, 2007
Figure 36: Percentage share of total 403(b) plan assets, by type of institution, 1996-2006
Figure 37: DC record keepers, by record kept assets in 457 plans, 2007
Figure 38: DC record keepers, by record kept assets per plan, 2007
Figure 39: DC record keepers, by new plans won in 2006
Distribution of assets in the DC plans
Figure 40: Where U.S. retirement assets are held, year end 1996 -2006
Figure 41: Defined contribution plan assets held in mutual funds vs. other investments, 1996-2006
IRAs
Figure 42: Source of IRA assets, by percent of total IRA assets, year-end 2004
Figure 43: where IRA assets are held, percentage share by type of institution, 1996-2006
Age and worker tenure
Figure 44: Percentage of plan participants, by age, August 2007
Figure 45: Percentage of plan participants, by job tenure, August 2007
Asset allocation by participants in DC plans
Lifecycle and lifestyle funds
Figure 46: Lifecycle fund assets and market share - top five complexes as of July 2007
Levels of DC plan participation
Figure 47: Participation in defined contribution retirement plans by selected worker and establishment
characteristics, private industry, 2006
Figure 48: Percentage of salary toward retirement this year, February 2007
Figure 49: Changed percentage of contribution in past 12 months, February 2007
Account balances
Figure 50: Average account balance, by age and tenure, 2006
Figure 51: Median account balance among long-tenured participants, by age and salary, 2006
Asset allocation strategies
Figure 52: Level of understanding of asset allocation, February 2007
Figure 53: Current retirement savings allocation, February 2007
Figure 54: Average asset allocation of 401(k) accounts, by participant age (% of account balances), 2006
Figure 55: Distribution of 401(k) plans, participants and assets by investment options, 2006
COMPETITIVE LANDSCAPE
New products in the marketplace
Lifecycle funds
Additional savings programs
Advice products
Rollovers
Retirement Income through annuity-type products
Behavioral finance initiatives
ADVERTISING AND PROMOTION
Figure 56: Top 10 mutual fund advertisers, advertising spend, January-May 2007
Notable print and direct mail advertising
Figure 57: fidelity low-cost annuity print advertisement, October 2007
Figure 58: e401(k) Retirement Plan from Fidelity Investments, enrollment mailer, August 2007
Figure 59: TIAA-CREF print advertisement, October 2007
Figure 60: Retirement funds from Vanguard print advertisement, July 2007
Figure 61: TD Ameritrade target date exchange traded funds print advertisement, October 2007
THE CONSUMER—WHO OWNS WHAT AND HOW MUCH IS INVESTED
401(k) plan participant demographics
Types of plans owned
Figure 62: Ownership of retirement plans, by gender, August 2007
Figure 63: Ownership of retirement plans by age, August 2007
Figure 64: Ownership of retirement plans by income, August 2007
Figure 65: Ownership of retirement plans by race/ethnicity, August 2007
Figure 66: Ownership of DC retirement plans by level of education, August 2007
Figure 67: Ownership of DC retirement plans by employment status, August 2007
Household assets in retirement accounts
Figure 68: Total invested in all of household’s retirement accounts (such as 401(k), IRA, etc.), by gender,
August 2007
Figure 69: Total invested in all of household’s retirement accounts (such as 401(k), IRA, etc.), by age, August
2007
Figure 70: Total invested in all of household’s retirement accounts (such as 401(k), IRA, etc.), by income,
August 2007
Figure 71: Total invested in all of household’s retirement accounts (such as 401(k), IRA, etc.) by race/ethnicity,
August 2007
Figure 72: Total invested in all of household’s retirement accounts (such as 401(k), IRA, etc.), by presence of
children, August 2007
Retirement savings: Attitudinal differences
Figure 73: Attitudinal differences between 401(k) owners and non-owners, January-October 2006
THE CONSUMER—TYPES OF INVESTMENTS AND PLANNING UNDERTAKEN
Retirement savings: Financial planning activities
Figure 74: Types of financial planning done, by gender, August 2007
Figure 75: Types of financial planning done, by age, August 2007
Figure 76: Types of financial planning done, by income, August 2007
Figure 77: Types of financial planning done, by race/ethnicity, August 2007
Consumers and lifecycle funds
Figure 78: I invest in lifecycle or lifestyle funds that automatically rebalance my portfolio for me, by gender,
August 2007
Figure 79: I invest in lifecycle or lifestyle funds that automatically rebalance my portfolio for me, by age, August
2007
Figure 80: I invest in lifecycle or lifestyle funds that automatically rebalance my portfolio for me, by income,
August 2007
Figure 81: I invest in lifecycle or lifestyle funds that automatically rebalance my portfolio for me, by
race/ethnicity, August 2007
Consumers and investment decision making
Figure 82: Primarily make the decisions in household as to how retirement savings should be invested, by
gender, August 2007
Figure 83: Primarily make the decisions in household as to how retirement savings should be invested, by age,
August 2007
Figure 84: Primarily make the decisions in household as to how retirement savings should be invested, by
income, August 2007
Figure 85: Primarily make the decisions in household as to how retirement savings should be invested, by
race/ethnicity, August 2007
Consumers and use of advisors
Figure 86: I pay an independent advisor to manage my account for me, by age, August 2007
Figure 87: I pay an independent advisor to manage my account for me, by income, August 2007
Figure 88: I pay an independent advisor to manage my account for me, by race/ethnicity, August 2007
Figure 89: I would be interested in having someone manage my account for me for a flat fee, by gender, August
2007
Figure 90: I would be interested in having someone manage my account for me for a flat fee, by age, August
2007
Figure 91: I would be interested in having someone manage my account for me for a flat fee, by income, August
2007
Figure 92: I would be interested in having someone manage my account for me for a flat fee, by race/ethnicity,
August 2007
Figure 93: Percentage who have obtained advice from a financial professional in the past year
THE CONSUMER—INCIDENCE OF CHANGING INVESTMENTS AND VIEWS ON RETIREMENT PLAN
OPTIONS
Consumers and involvement in monitoring retirement accounts
Figure 94: I have changed the investments in my retirement portfolio in the last year, by gender, August 2007
Figure 95: I have changed the investments in my retirement portfolio in the last year, by income, August 2007
Consumers and the number of investment options in their plans
Figure 96: I feel that there are not enough investment options in my retirement plan, by gender, August 2007
Figure 97: I feel that there are not enough investment options in my retirement plan, by age, August 2007
Figure 98: I feel that there are not enough investment options in my retirement plan, by race/ethnicity, August
2007
Are there too many options?
Figure 99: I feel there are too many options in my retirement plan, by age, August 2007
Figure 100: I feel there are too many options in my retirement plan, by income, August 2007
Figure 101: I feel there are too many options in my retirement plan, by race/ethnicity, August 2007
Figure 102: I feel there are too many options in my retirement plan, by marital status, August 2007
Consumers and use of the Internet for decision making
Figure 103: I use information from sources on the Internet to make decisions about my retirement savings, by
age, August 2007
Figure 104: I use information from sources on the Internet to make decisions about my retirement savings, by
income, August 2007
Consumers and level of understanding of investment options in their plans
Figure 105: I understand all of the investment options offered in my retirement savings plan, by gender, August
2007
Figure 106: I understand all of the investment options offered in my retirement savings plan, by income, August
2007
Consumers and account monitoring
Figure 107: I do not pay as much attention to my retirement portfolio as I should, by gender, August 2007
Figure 108: I do not pay as much attention to my retirement portfolio as I should, by age, August 2007
THE CONSUMER—INTEREST IN GUARANTEED PRODUCTS AND ETFS
Consumers and guaranteed products
Figure 109: Interested in mutual funds that incorporate a guarantee component, by age, August 2007
Figure 110: Interested in mutual funds that incorporate a guarantee component, by income, August 2007
Figure 111: Interested in mutual funds that incorporate a guarantee component, by race/ethnicity, August 2007. 98
Consumers and exchange traded funds
Figure 112: Interest in exchange traded funds for retirement accounts, by age, August 2007
Figure 113: Interest in exchange traded funds for retirement accounts, by income, August 2007
Figure 114: Interest in exchange traded funds for retirement accounts, by race/ethnicity, August 2007
THE CONSUMER—WHO THEY TURN TO FOR RETIREMENT ADVICE AND WHY
Consumers and trust: Who they rely on for retirement advice
Figure 115: Most trusted to give good retirement planning advice, by age, August 2007
Figure 116: Most trusted to give good retirement planning advice, by income, August 2007
Figure 117: Most trusted to give good retirement planning advice, by race/ethnicity, August 2007
What inspires consumers’ trust
Figure 118: Why consumers trust an organization the most, by gender, August 2007
Figure 119: Why consumers trust an organization the most, by age, August 2007
Figure 120: Why consumers trust an organization the most, by income, August 2007
FUTURE TRENDS AND FORECAST
“Automatic” solutions
“Single Decision” investment options
Rise of the Roth
Increased access to advice
Expanding role of advisors
Increased interest in offering investment only business
Emphasis on retirement income solutions
Increased competition for rollover IRAs
Increased availability of CITs and ETFs
Increased emphasis on the Internet to facilitate retirement planning
Defined Contribution retirement plans for small employers
More targeted approach to encouraging retirement plan participation
Healthcare as part of retirement savings
APPENDIX: TRADE ASSOCIATIONS
Investment Company Institute
Employee Benefits Research Institute
401(k) Council for America
Society of Professional Administrators and Recordkeepers (SPARK)
American Association of Retired Persons
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