Northern Trust Survey

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Recently, PBUCC Staff and Investment Committee members met with outside experts from Northern Trust, Neuberger Berman, and GSAM to:

  • gain further insight into trends in retirement plan structure and participant choices, to see how the Pension Boards’ 403(b) Annuity Plan compares, and
  • review our Faith and Finance (Sustainable Investing) initiatives.

The review included a recent report from a survey of the top 50 Defined Contribution (DC) retirement plans serviced by Northern Trust, representing $406 billion in assets. A Defined Contribution plan is a tax-deferred retirement plan, like a 401(k) or a 403(b), in which employees contribute a fixed amount or percentage of their paychecks in an account that is intended to fund their retirements.  Key observations were:

  1. Many plans offer an overwhelming number of investment choices.
    A simpler, streamlined approach is more likely to improve participant decision-making and outcomes (higher balances). Northern Trust believes 12 choices are ideal.
    • The Pension Boards Annuity Plan currently offers the benefit of 10 participant choices.
    • GSAM believes PBUCC offers a concise and clear line-up for participants.
  2. Brand-name, single-manager mutual funds are becoming less important to retirement savers.
    Leading plans are now emphasizing professionally-managed multi-manager choices. These fund choices have lower fees than mutual funds, help streamline menus, enable access to more customized strategies (including social screening), and often have superior diversification, with better risk-adjusted outcomes.  
    • The Pension Boards’ Annuity Plan offers 10 professionally-managed multi-manager choices to help you achieve your retirement objectives.
  3. Target Date Funds represent 29% of DC retirement assets under management.  
    • The Pension Boards’ accumulating participants have allocated 10% of their assets to the Target Annuitization Date (TAD) Funds, which get more conservative as savers get closer to retirement. Improved education about benefits of asset allocation may improve retirement outcomes through more TAD participation.
  4. 85% of Plan Sponsors surveyed believe that retirement income should be the core purpose of a DC plan.
    Four years earlier, only 9% held that opinion; 44% of participants believe that “developing monthly income from my investments” is the most important consideration when planning for retirement.
    • The Pension Boards’ Annuity Plan offers the security of lifetime income at retirement through the Participating and Basic Annuities.
  5. Demand is increasing from all generations of retirement savers for investments that align with individual and/or organizational values.
    • The Pension Boards’ Annuity Plan offers the Northern Trust Global Sustainability Index Fund (GSIF) as a Fund choice.
    • Eight of the Funds have significant holdings in “green bonds.”
    • The inclusion of environmental, social, and governance (ESG) oriented investments, along with social screening and shareholder engagement, continues to be a priority for PBUCC.