Asset Managers Sharpen Their Focus On Defined Contribution Plan Opportunities

Eliane Chavagnon

29 January 2015

Defined contribution plans are emerging as the primary retirement savings vehicle for individuals, with contributions expected to grow steadily and approach $500 billion by 2019 – almost doubling what it was just three years ago, according to Jessica Sclafani, senior analyst at Cerulli Associates.

Defined contributions are a type of retirement plan in which the employer, employee or both make contributions on a regular basis.

According to the Boston, MA-based research firm's latest report – entitled Retirement Markets 2014: Sizing Opportunities in Private and Public Retirement Plans - total private defined contribution assets are expected to exceed $6 trillion in 2018.

“As defined benefit plans become rarer, particularly within the private sector, 401 accounts will likely be the primary savings vehicles for a large portion of US workers,” explained Sclafani. “Asset managers are sharpening their focus on defined contribution investment-only opportunities, refining their strategy and products, thereby creating an increasingly competitive marketplace.”

Sclafani said private DC plans have emerged as one of the most important savings vehicles in the overall US retirement system, surpassing all other retirement channels - with the exception of the retail IRA market.

Indeed, last year Baby Boomers helped drive the size of the IRA market to $6.5 trillion, with rollovers adding $324 billion to the total, Cerulli reported previously.

“We anticipate that IRA asset growth will continue through the remainder of the decade as defined contribution assets continue to roll into individual accounts,” said Shaan Duggal, an analyst at Cerulli.