Fidelity Investments has introduced an annuity purchase program, Fidelity Lifetime Income Solutions, that will enable 401(k) plan participants to convert part of their savings into a pension-like guaranteed retirement income stream.

"It is for people who are retiring and ready to create lifetime income. The minimum age is 45 and, since the annuity purchased from the 401(k) is considered a rollover, there is no pre-59-1/2 early withdrawal penalty," said Tim Gannon, vice president, Fidelity retiree products.

The annuities are offered separately from the 401(k) plan, and the plan sponsors incur no costs or administrative responsibilities. In the U.S., Fidelity services some 13,000 organizations with 19 million employees, administering about $730 billion in assets and managing about $480 billion.

Plan participants can choose from competing immediate annuities offered by a number of providers, which so far include Fidelity, The Principal and John Hancock. The annuities are off-the-shelf products, and will be sold directly to participants without agents or commissions. Parker Hannifin, a Cleveland-based manufacturer, and Norwood, Mass.-based Analog Devices are among the first employers to join the new program.

Payout options include fixed payments, variable payments or a combination of the two, for life or a certain period. The annuities can be purchased only with a lump-sum rollover of pre-tax assets from 401(k) accounts.

(c) 2006 Money Management Executive and SourceMedia, Inc. All Rights Reserved.

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