Products October 6, 2014

John Hancock Reduces Fees on Retirement Portfolios

October 6, 2014 (PLANSPONSOR.com) – John Hancock Investments lowered expenses across its suite of Retirement Living Portfolios, pledging up to 31% in fee savings for shareholders.
Reported by

The firm says the move is meant to position the portfolio suite for use in the growing target-date market. John Hancock Retirement Living Portfolios combine up to 50 investment strategies from 20 specialized managers. Active asset-allocation decisions are made by the global asset-allocation team at John Hancock Asset Management.

The Retirement Living Suite comprises 10 portfolios with target retirement dates spanning from 2010 to 2055. The firm cut expenses by 20 to 26 basis points across the entire suite. John Hancock says it has seen rapid growth in interest for competitively priced target-date funds (TDFs) and related portfolio solutions after the Pension Protection Act of 2006 paved the way for plan sponsors to add age-based portfolios as default investment options in plans with automatic enrollment.

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

John Hancock cites research from Cerulli Associates showing target-date funds are on track to receive 63% of all 401(k) contributions and could make up 35% of all 401(k) assets by 2018. The firm also reminds retirement plan sponsors and other fiduciaries of the Department of Labor guidance, issued in 2013, on choosing among target-date strategies. The guidance specifically mentions the importance of reviewing TDF fees and asset class diversification.

Andrew G. Arnott, president and CEO of John Hancock Investments, says the Retirement Living Portfolios strive to deliver the investing style of large pension plans and endowments for individual retirement plan participants. The goal is better diversification across securities, asset classes, investment styles, and managers, he adds.

Administration October 6, 2014

S&P 1500 Pensions See Largest 2014 Decrease in Liabilities

October 6, 2014 (PLANSPONSOR.com) - The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies remained at 84% at the end of September, according to Mercer.
Reported by

Increases in interest rates used to calculate corporate pension plan liabilities offset falling equity markets, holding funded status constant. The collective estimated deficit of $352 billion as of September 30, 2014, is down $17 billion from the estimated deficit of $369 billion as of August 31—the largest monthly decrease in pension liabilities this year, Mercer says. The September deficit is up $116 billion from the beginning of the year.

The S&P 500 index dropped by 1.6% during September. Typical discount rates for pension plans as measured by the Mercer Yield Curve increased by 20 basis points to 4.10%, driving liabilities downward, and offsetting the decrease in plan assets.

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

“The increase in interest rates and decrease in equities this month is the first major deviation from the trend of decreasing interest rates and increasing equities that we have seen throughout 2014,” says Jim Ritchie, a principal in Mercer’s retirement practice.  “Rising interest rates gave us our largest monthly decrease in pension liabilities this year, but unfortunately the reduction in liabilities was largely offset by losses on assets.”

Ritchie adds, “This change in trends in 2014 is a good reminder that plan sponsors should stress test their risk management strategies to better understand how their strategies will hold up when markets change course. We just saw in the past week two significant  annuity buyouts in the market place, and anticipate many other sponsors will be seriously exploring buyout and other risk transfer strategies to better manage their pension risk, especially if interest rates start rising.”

Mercer’s estimates are based on each company’s year-end statement and by projections to September 30, in line with financial indices. This includes U.S. domestic qualified and non-qualified plans and all non-domestic plans. The estimated aggregate value of pension plan assets of the S&P 1500 companies as of December 31, 2013, was $1.80 trillion, compared with estimated aggregate liabilities of $2.03 trillion. Allowing for changes in financial markets through September 30, 2014, changes to the S&P 1500 constituents, and newly released financial disclosures, at the end of August the estimated aggregate assets were $1.85 trillion, compared with the estimated aggregate liabilities of $2.21 trillion.

«