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BOSTON, Feb. 22, 2021 /PRNewswire/ - John Hancock
Retirement continues to observe retirement readiness in
participants despite the impact of the COVID -19 pandemic.
Throughout 2020, the majority of the more than 1.1 million
participants in over 1,000 John
Hancock open architecture defined contribution (DC) plans
lost relatively little ground in their efforts to save for a secure
retirement.
From October 1, 2019 through
September 30, 2020, John Hancock
Retirement observed participant behavior and data with a focus on
retirement readiness, retirement planning, and retirement
investing. John Hancock defines
retirement readiness at a plan level as the projected ability for
participants to replace 70% or more of their workplace earnings in
retirement.* The resulting State of the Participant 2021 study
shows that the percentage of participants achieving retirement
readiness slipped very slightly from 49.6% on September 30, 2019 to 47.9% on the same date last
year.
"The data we observed into and through a challenging 2020 is
actually quite encouraging," said Lynda
Abend, chief data officer, John Hancock Retirement. "It
reinforces the roles that participant engagement, plan design, and
the resilience of retirement savers play in keeping people on track
toward a secure retirement."
John Hancock's State of the
Participant 2021 study spotlights the status and behavior of DC
plan participants. Its data highlights the positive outcomes of
automatic enrollment and increase features the potential of
personalized planning, as well as intensive engagement and
educational efforts.
Among the findings from the State of the Participant 2021
study:
- Defined Contribution plans continued to perform their
critical role in preparing workers for retirement: Given the
widespread impact of the pandemic on personal finances, the dip in
retirement readiness, from 49.6% to 47.9%, doesn't seem too
alarming, although it's certainly worth monitoring closely. Most
participants below age 50, along with those earning between
$50,000 and $150,000 per year, remain on track for a secure
retirement. Participants aged between 30 and 39 were the most
retirement-ready at 64 percent, followed by those younger than 30
at 58 percent, and participants aged 40 through 49 at 52
percent.
- Average account balances tracked the market's dip and
recovery: When global equity markets fell suddenly in the early
spring of last year, a very small percentage of participants moved
money to non-equity investments. This allowed them to benefit from
the eventual rebound and enjoy average account balances that
remained close to even in the period from March 1 through September 30. Accounts held by
those under age 30 enjoyed the best average return over this
stretch, at 5.1 percent. At the other end of the scale, account
balances for those 60 and older decreased by 2.6 percent.
- COVID-19 created a group of participants in need of
immediate guidance: Introduced under last April's CARES Act,
the COVID-related distribution served as a financial lifeline for
3.4% of John Hancock's participant
base. Though this percentage was small, our data analytics team
calculated that these withdrawals, if not replaced in participants'
accounts, could reduce the plan savings they bring into retirement
by as much as 10-13%.
- Despite all they were dealing with, participants showed an
interest in personalized, expense-based planning: John Hancock
Retirement launched an interactive planning tool for the plan
participants they service that coincided with the emergence of the
COVID-19 pandemic. Seven out of every ten participants who sampled
the tool proceeded to complete a personalized retirement expense
projection. Over 20% of these DC plan savers increased their plan
contribution on the spot, at rates that averaged from 4.0-5.2%,
depending on age.
- Digital capabilities have made automatic enrollment easier
and more efficient than ever: The auto-increase feature is
indispensable in helping shape a "save more" attitude and raising
the default contribution rate can help give more new participants a
needed nudge. Auto features—such as auto-enrollment and auto
increase—are among the most successful strategies for boosting
contribution rates and retirement readiness. In fact, plans that
combined these auto features enjoyed an eight percentage-point
advantage (19% in actual terms) in retirement readiness over plans
with no auto features at all.
"We are really pleased to see the continuation of impressive
outcomes of auto-enrollment and auto increase," said Scott Francolini, Head of Strategic Relationship
Management and Consulting, John Hancock Retirement. "Even with a
backdrop of disruptions that are out of our control, these elements
of plan design are relatively easy to implement and can make a big
difference on the retirement readiness of participants."
For the State of the Participant 2021 report, please click
here.
Methodology
State of the Participant 2021 data was derived from John Hancock's open-architecture platform, which
included 1.1 million participants, 1,076 plans, and $76.6 billion in assets under management as of
September 30, 2020.
* John Hancock
defines retirement-readiness as the expected ability for a
participant's projected assets at normal Social Security age to
replace at least 70 percent of their preretirement earnings. The
inputs for this calculation include current age, salary, account
balance, participant contribution, enrollment in auto-escalation,
employer matching and discretionary contributions, pension
eligibility and projected Social Security benefits.
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About John Hancock Retirement
John Hancock Retirement
is the U.S. retirement business of Manulife Investment Management.
For nearly 50 years, we've helped people plan and invest for
retirement; today, we're one of the largest full-service providers
in the United
States.1 We take a hands-on consultative
approach based on the idea that no two plans - and no two plan
participants - are exactly alike. We partner with plan sponsors,
advisors, and third-party administrators to ensure that every plan
is personal to the participant and delivers results.
As of December 31, 2020,
John Hancock serviced over 51,000
retirement plans with over 3 million participants and over
$205 billion in AUMA.2
1 "2020
Defined Contribution Recordkeeper Survey," PLANSPONSOR,
2020.
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2 As of
December 31, 2020, John Hancock Life Insurance Company (USA)
supported 46,973 plans, 1,566,094 participants, and
$102,310,069,468.17 in AUMA. John Hancock Life Insurance Company of
New York supported 2,513 plans, 77,833 participants, and
$6,052,455,987.28 in AUMA. John Hancock Retirement Plan Services,
LLC supported 2,128 plans, 1,393,244 participants, and
$97,020,284,307.76 in AUMA. Participant Counts reflect all active
participants with a balance. Approximate unaudited figures for John
Hancock, provided on a U.S. statutory basis.
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About Manulife Investment Management
Manulife Investment Management is the global wealth and asset
management segment of Manulife Financial Corporation. We draw
on more than a century of financial stewardship and the full
resources of our parent company to serve individuals, institutions,
and retirement plan members worldwide. Headquartered in
Toronto, our leading capabilities
in public and private markets are strengthened by an investment
footprint that spans 17 countries and territories. We
complement these capabilities by providing access to a network of
unaffiliated asset managers from around the world. We're
committed to investing responsibly across our businesses. We
develop innovative global frameworks for sustainable investing,
collaboratively engage with companies in our securities portfolios,
and maintain a high standard of stewardship where we own and
operate assets, and we believe in supporting
financial well-being through our workplace retirement plans.
Today, plan sponsors around the world rely on our retirement plan
administration and investment expertise to help their
employees plan for, save for, and live a better
retirement.
As of December 31, 2020, Manulife Investment
Management had CAD$966 billion
(US$758 billion) in assets under management and
administration. Not all offerings are available in all
jurisdictions. For additional
information, please visit manulifeim.com.
John Hancock
Investment Management Distributors LLC is the principal underwriter
and wholesale distribution broker dealer for the John Hancock
mutual funds. Member FINRA, SIPC.
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John Hancock
Retirement Plan Services LLC offers administrative or recordkeeping
services to sponsors and administrators of retirement plans.
John Hancock Trust Company LLC provides trust and custodial
services to such plans. Group annuity contracts and
recordkeeping agreements are issued by John Hancock Life Insurance
Company (U.S.A.), Boston, MA (not licensed in New York) and John
Hancock Life Insurance Company of New York, Valhalla, New
York. Product features and availability may differ by state.
Securities offered through John Hancock Distributors LLC. Member
FINRA, SIPC.
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NOT FDIC INSURED. MAY
LOSE VALUE. NOT BANK GUARANTEED.
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© 2021 John Hancock.
All rights reserved.
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SOURCE John Hancock Retirement