Over and above what we have seen in the past, 401(k) participants are increasing their contribution rates at a faster clip than ever before. In fact, 32% of participants increased their deferral rate over the past year, far surpassing the 21% who expressed the intention to do so in 2013. Moreover, one-quarter (26%) of those who did not make a change to their contribution levels within the last year indicate the intention to do so in the next 12 months. Not only does this tee up years of future growth in account value, but it represents an opportunity for providers as participants become more engaged in saving for retirement. These and other findings are included in DC Participant PlanscapeTM, an annual Cogent Reports™ study by Market Strategies International.

The younger generations are driving this increase in contribution rates, and Cogent found that Gen X and Y participants have a stronger appetite for automatic plan features such as auto-increase and auto-rebalance, making them prime candidates for the combination of plan features that maximize savings potential.

“This spike in contribution rates is likely due to the improved economic climate in the US and growing account balances. The reason this increase is coming primarily from the younger generation may be because these cohorts are starting to understand the value of investing in their defined-contribution (DC) plans and the importance that their savings in these plans will have on their financial well-being in retirement,” explains Linda York, vice president of syndicated research at Market Strategies and industry expert. “In an era where many providers are choosing to get out of the DC plan record-keeping business, those that maintain their presence may be sitting on a potential gold mine with their Gen X and Gen Y participants.”

The full report, first conducted in 2012, evaluates the competitive position of 20 leading plan providers on a variety of metrics, including overall satisfaction and likely consideration for additional products and services outside of the retirement plan. At an industry level, participant satisfaction with DC plans has improved dramatically over the past 12 months, presenting the strongest opportunity providers have had since the financial crash to capitalize on goodwill with their current customers. “Among the top 20 providers, seven saw a significant lift in participant satisfaction, which, if maintained, could lead to lucrative cross-sell business in the future,” says York.

Top 10 Providers on DC Participant Satisfaction (Top 3-Box)

  1. American Funds   70%   ▲‘12,13 2. Bank of America Merrill Lynch 68% ▲‘12,13 3. Wells Fargo 67% ▲‘12,13 4. Vanguard 66% 5. T. Rowe Price 66% ▲‘13 6. Fidelity Investments 64% ▲‘12 7. Charles Schwab 63% 8. Principal Financial Group 59% 9. Transamerica 59% ▲‘13 10. J.P. Morgan Retirement Plan Services 58% ▲‘13   ▲/▼ = Significant change from stated year  

If you would like to learn more, register for Linda’s webinar, Tapping Rollover Dollar Potential, on Thursday, January 29, at noon (ET).

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About the DC Participant PlanscapeTM Report

Cogent Reports conducted an online survey with 4,636 defined contribution plan participants from September to October 2014. By using quota targets while in the field and applying minimal statistical weighting post-fielding, the data reported in this study are representative of the “engaged” plan participant universe, defined as those who are 18 years or older, contribute at least 1% to a current plan, and/or have $5,000 or more in at least one former plan. Targets were set to investor gender, region, age, education and household income using US census data filtered by the screening criteria (a market sizing flyover survey was used in order to filter the US census data).

About Market Strategies International

Market Strategies International is a market research consultancy with deep expertise in consumer/retail, energy, financial services, healthcare, technology and telecommunications. The firm is ISO 20252 certified, reflecting its commitment to providing intelligent research, designed to the highest levels of accuracy, with meaningful results that help companies make confident business decisions.

Market Strategies conducts qualitative and quantitative research in 75 countries, and its specialties include brand, communications, CX, product development, segmentation and syndicated. Its syndicated products, known as Cogent Reports, help clients understand the market environment, explore industry trends and monitor their brand and products within the competitive landscape. Founded in 1989, Market Strategies is one of the largest market research firms in the world, with offices in the US, Canada and China. Read Market Strategies’ blog at FreshMR, and follow us on Facebook, Twitter and LinkedIn.

Market Strategies InternationalAnne Fallon, 617.715.7611anne.fallon@marketstrategies.com