Authorization to buy 4,300 Prudential pension plans valued at $ 3.55 billion
Empower Retirement announced Wednesday that it has agreed to acquire Prudential Investments’ full-service annuity business in a $ 3.55 billion deal as the retirement plan manager strengthens its client portfolio and accelerates its expansion.
With this transaction, which includes 4,300 retirement plans and 4 million participants, Empower now has 16 million customers in all major markets including government, nonprofits and for-profit companies, said Ed Murphy, CEO of Empower. The acquisition includes defined contribution, defined benefit, unqualified and rolling individual retirement accounts as well as Prudentials PRU, + 2.17% stable value and investment products for separate accounts.
“We are committed to helping Americans save for retirement,” he said in an interview with MarketWatch. “There are opportunities for us to expand and grow and build on that mission.” Prudential’s business was a “great” fit for Empower, he said. “We believe that we can offer enormous added value to our participants, plan sponsors and now the 16 million people who rely on us.”
Workplace plans are a crucial way for Americans to save for retirement, although only about half of Americans have access to one. Employer sponsored plans, such as those managed by Empower, allow employees to automatically and seamlessly save money for their future through their paychecks. State governments are trying to mimic this structure with their own state-sponsored retirement plans, using investment vehicles similar to IRAs.
Empower knows a thing or two about acquisitions. Last year the company announced it was buying MassMutual’s retirement business. In 2014, Empower was created through the merger of Great-West Financial and Putnam Investments with the acquisition of JP Morgan’s repurchase business.
Empower also bought online financial planning firm Personal Capital as part of a $ 1 billion deal in 2020 and said it will use this technology to help its new retirees through the Prudential transaction.
This acquisition is just the latest trend in the retirement industry in the past decade, said Drew Way, director of retirement research at Corporate Insight. Given the tight margins in the field of records, companies need to join forces to keep growing.
These companies must also use tools to promote comprehensive financial and retirement planning, Way said. Participants can be told that they need to save at least 10% of their salaries for retirement, but “that doesn’t help with student and credit card debt,” he said. “Businesses are trying to create a more holistic digital experience where their 401 (k) plans are aggregated across their overall portfolio and once they’re in a more convenient place, they can get them to make more contributions.”
Empower is doing just that with its digital platform by acquiring Personal Capital, Way said. When clients log on to the homepage, they see their readiness to retire, and with Personal Capital technology, they have more finance-related content. “You also see things like budgeting tools that offer more of that holistic picture than just a retirement focus,” said Way.
The transaction is expected to close in the first quarter of 2022. At this point, Prudential Retirement Plan participants will continue to have access to their accounts as they currently are. Right before the transition, Empower will post a schedule for attendees to move to their platforms, but there will be “no disruptions,” Murphy said.