Fidelity^® Survey Finds Widespread Lack of Awareness Among Pension Plan Participants About How Their Plans Work

Company Offers Educational Tools to Help Employees Make Better-Informed Decisions about Their Pensions

BOSTON – With more than 42 million¹ Americans participating in corporate pensions today, a Fidelity Investments^® survey² of corporate pension plan participants has found a widespread lack of awareness about how those plans work. Seventy one percent of those surveyed do not have detailed knowledge of how their pension plans operate, yet more than half said they are counting on those pensions to help pay for living expenses in retirement.

Fidelity, service provider to more than 4 million corporate pension plan participants³, examined the attitudes and behaviors of more than 500 corporate employees who participate in employer-sponsored pension plans nationwide. Nearly one-third (31 percent) of those surveyed said they don’t know their plan’s vesting schedule, 40 percent don’t know what their payment options will be upon retirement or when leaving their company and about one-quarter (27 percent) don’t know at what age they can begin to receive payments.

“Corporate pension plans remain a critical component of retirement income for millions of Americans,” said Wendy Foster, Senior Vice President in Fidelity’s defined benefit business. ”Our research highlights an opportunity for companies to better educate their employees about the value of employer-sponsored pension plans. Fidelity offers a broad range of guidance, both on its participant website NetBenefits^® and on the phone with representatives, to help workers understand and manage their pension plans and decide how these assets fit into their overall retirement strategy.”

The majority of those surveyed (61 percent) said they have never inquired about how much money they will receive upon retirement. When asked to explain their passive approach to determining the monetary value of their pensions, 43 percent said they rely on their employer to provide the information when necessary and more than one in four (29 percent) said they lack knowledge about the plan and/or they do not know whom to ask for information.

Fidelity Offers Many Ways for Participants to Learn about Their Plans
On NetBenefits^®, employees whose pension plans are recordkept by Fidelity can log on to Your Pension Summary to receive information including:

A participant’s estimated pension payout based on an assumed retirement age

A summary description of their pension plan with information such as how the plan calculates
benefits or when participants can initiate their payments

Their vesting status or the percentage they are vested in the plan

A modeling tool to calculate different payout estimates based on retirement age

NetBenefits^® also recently launched a “Collect Your Pension” section where participants can initiate their pension payments online and gain access to a series of educational materials to help them better understand their pension plans. The materials not only outline the basics of pension payments (annuity payments, lump sum payments or a combination of both), but also explain some of the advantages and consequences associated with each payment type. The new materials include an article “How to Take a Pension Payout,” a checklist “Initiating Your Pension,” a link to a retirement income planning tool and a five-minute instructional video outlining the tax implications and advantages of each payment option.

Education is Critical, as Reliance on Pensions is High
On average, participants expect their pension benefits to supply almost one quarter of their retirement income, the survey found. Most (56 percent) said they will rely on their pension payouts to cover living expenses during their retirement years, rather than as “extra” money for expenses like travel or hobbies. The breakdown of expected sources of income in retirement, on average, is as follows: pensions (23 percent), defined contribution plans (27 percent), Social Security (26 percent) and savings/other (24 percent).

Most of the pension plan participants surveyed (56 percent) said they expect to receive annuitized payments from their plans when they retire. Just 10 percent plan to take lump sum payments and 9 percent expect a combination of both a lump sum payment and a form of annuity. One-quarter of those surveyed said they don’t know how they will be paid. Among those surveyed who plan to receive only annuitized payments, the median expected amount is $1,500 a month. The median expected lump sum payment is $95,000.

“Understanding your pension benefits is an important part of developing an accurate income plan for retirement,” said Foster. “There are many key areas that need to be addressed and analyzed, including vesting status, preferred payment method, estate planning and the tax implications of any action.”

Fidelity is one of the top three corporate pension service providers in the United States.⁴ The firm services 112 employers with 674 plans.⁵ Each year, it processes more than 100,000 retirement initiations and services more than 1 million retirees.⁶

About Fidelity Investments
Fidelity Investments is one of the world’s largest providers of financial services, with assets under administration of more than $3.6 trillion, including managed assets of more than $1.6 trillion, as of June 30, 2011. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.

1 U.S. Department of Labor Employee Benefits Security Administration December 2010 Private Pension Plan Bulletin Historical Tables and Graphs
2 Survey conducted online by Versta Research of Evanston, Ill., from May 4 to May 9, 2011. It included 506 respondents who said they participate in active (available to all employees), partially frozen (not open to new employees) and fully frozen corporate pension plans. The average employment tenure was 14 years.
3 Fidelity data
4 PLANSPONSOR April 2011
5 Fidelity data as of December 2010
6 Fidelity data Guidance provided by Fidelity is educational in nature, is not individualized and is not intended to serve as the primary or sole basis for your investment or tax-planning decisions.
 
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