401(k) annuity offerings expand as adoption remains limited

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401(k) annuity offerings expand

Highlights

Morningstar reports assets in target-date strategies with annuities reached $44 billion at March 2026, up from $25 billion a year earlier, but this remains less than 1% of the over $4.8 trillion in target-date funds at the end of 2025.
A Plan Sponsor Council of America survey finds only 5% of respondents offer a target-date fund with an annuity while 15% are considering adding one.
The Department of Labor proposes a rule to ease inclusion of alternative assets including lifetime income strategies in defined contribution plans, and major firms such as BlackRock, JP Morgan, Fidelity, Vanguard, and TIAA are expanding annuity options.

Survey findings and product growth

As reported by CNBC, BlackRock found that 76% of workplace savers surveyed say their generation will have less certainty about retirement income than previous generations, up from 67% in 2021. The asset manager, which commissioned the research with Escalent, says the poll of 1,312 workplace savers was conducted between April 15 and May 16 and found strong interest in plan features designed to generate income in retirement.

BlackRock says women are more concerned than men about outliving their savings and generating retirement income, but are less likely to adopt guaranteed-income solutions. Jaime Magyera, head of retirement and U.S. wealth advisory at BlackRock, says women would especially benefit from lifetime income because they tend to live longer.

Annuity options remain available in only a small number of employer-sponsored plans, usually through target-date funds that shift to more conservative allocations as workers approach retirement. Some structures let older workers use part of their savings to buy an insurance contract that converts a lump sum into monthly lifetime payments, while others allow withdrawals of a set percentage of savings each year for life.

Policy support and industry concerns

A recent survey by the Plan Sponsor Council of America found that 5% of respondents offer a target-date fund with an annuity, while 15% say they are considering one. Morningstar says assets in target-date strategies with annuities reached $44 billion at the end of March 2026, up from $25 billion a year earlier, but that still represents less than 1% of the more than $4.8 trillion in target-date funds at the end of 2025.

Morningstar says target-date funds with annuities are still a small part of the broader market, but signs suggest more plans are adopting the strategies and growth could accelerate. The Department of Labor recently proposes a rule to make it easier for employers to add alternative assets, including lifetime income strategies such as annuities, to 401(k), 403(b) and other defined contribution plans, while the bipartisan Retirement Simplification and Clarity Act would allow workers to roll over 401(k) assets into a qualified annuity.

Major financial firms including BlackRock, JP Morgan Asset Management, Fidelity, Vanguard and TIAA are expanding annuity-style options in retirement accounts. Still, some experts question whether annuities are appropriate for workplace plans, citing concerns about costs, liquidity, complexity and the need for workers to understand whether payments are fixed or inflation-adjusted, as well as the fees involved.

Our earlier coverage of the UK’s planned overhaul of the tax-free ISA system explained how the government aims to push more household savings from cash into investments by introducing a £12,000 cash ISA cap from 2027 and taxing interest on cash held in stocks-and-shares ISAs. We also outlined proposals to replace the Lifetime ISA with a new First Time Buyer ISA and noted industry concerns that added rules could make a once-simple savings product more complex for consumers.

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