State Street Partners with Annexus For Retirement Income TDF

By Alex Ortolani

This article was originally published by Plan Sponsor.

State Street Global Advisors has partnered with Annexus Retirement Solutions on a target-date fund series with a retirement income annuity, the companies announced Wednesday.

The State Street GTC Retirement Income Builder Series will come with Annexus Retirement Solutions’ embedded Lifetime Income Builder annuity in the TDF’s glidepath as a separate asset class, according to the press release. Global Trust Company will be the fiduciary and trustee of the investment vehicle.

Annexus is planning to offer the product early in the third quarter of this year through iJoin, a retirement plan platform provider connected to more than 50 recordkeepers. Once established, those recordkeepers and the plan sponsors in the iJoin network can provide participants access to the TDF through the plan menu or a managed account, says Dave Paulsen, chief distribution officer at Annexus Retirement Solutions.

“The participant has said to us that they want to maintain control all the way to and through retirement,” Paulsen says. “We built this inside of a TDF because the majority of plan participants want [their investing and retirement income setting] done for them, and the target-date does that. … It’s liquid, it’s easy for them and it doesn’t sacrifice growth.”

The Lifetime Income Builder product within the TDF trades like a mutual fund with a trading symbol, Paulsen says, making it portable across recordkeeper platforms should a participant change provider or a participant leave for a new employer. Paulsen says the model is unique and that Annexus has a patent application pending on the product. He compares it to other, less portable products in which a participant buys an annuity directly when near or in retirement.

“The majority of participants aren’t getting advice from an adviser on how to allocate their assets or buy an annuity,” he says. “We package it and do it all for them without harming growth or adding excess fees.”

Paulsen says the firm is also in talks with two top-tier recordkeeping platforms, with those talks expected to come to fruition later this year.

There is a need growing need for plan sponsors to offer participants options for decumulation of assets so individuals have enough income to live on in retirement and that it is sufficient to not for run out of money in old age. Despite federal legislation removing barriers for plan sponsors to incorporate in-plan annuities, 401(k) plans have generally not embraced adding the investments, according to Alight Solutions data published earlier this year.

The new State Street TDF series is designed to mitigate sequence of return risk—in which a participant sees a drop in savings near or in early retirement—and longevity risk when in retirement by “capturing quarterly high-water marks” on the account value and providing lifetime income via the annuity, according to the firms. The TDFs will target a 6% annual income rate when tapped for income, with the amount calculated using the highest captured high-water mark of the fund, according to the press release.

The Lifetime Income Builder annuity is backed by insurers Nationwide and Athene, with more insurance companies lined up to join the series, according to the announcement. State Street Global Advisors will provide glidepath recommendations to the trustee, GTC, and manage a portion of the solution’s underlying assets.

State Street and Annexus initially had announced a partnership to work on a TDF with an embedded annuity in March 2022.