Cogent Reports: DC Contribution Rates Are Climbing
27 January 2015 - 5:14AM
Business Wire
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).
Register Here >
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