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UK Individual Pensions 2008

Datamonitor
January 8, 2009
7 Pages - SKU: DFMN2090547

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Countries covered: United Kingdom

Introduction

With the individual pensions market undergoing significant change in recent years, the report analyzes the strength of individual pension products and concludes that the rise of SIPPs will continue at the expense of stakeholder and personal pensions. The report assesses the strategies available for providers to win new business in light of the Government's discussions on personal accounts.

Scope

Examines the current shape of the individual pensions market and explore factors that are currently limiting the sale of individual pensions products.
Comprehensive analyses of key products and regulatory trends affecting the individual pensions market in 2008.
Assesses the strategies to combat key barriers to save for pension provision with particular focus on market conditions and demographics.

Highlights

The individual pensions market has seen changes to its personal pensions area by the rise of SIPP products. The growing desire among investors to have some level of control over the way their underlying pensions' assets are handled and through which channels they are invested has increased the popularity of SIPPs among the UK customer base.

The potential for personal accounts to induce people to consider long-term savings plans is in question and the market has continued to polarize between stakeholder and SIPPs pensions. Providers can seize the opportunity to offer low-cost SIPPs to win new business in the middle market.

Reasons to Purchase

Provides detailed analysis of developments in the individual pensions market such as personal accounts.
Identify competitor innovations and dynamics, and changes taking place in the distribution dynamics of the market.
Understand the future implications to the market, and the key product opportunities that exist over the next 5 years.

Overview: Catalyst; Summary; Executive Summary; Table of Contents; Table of figures; Table of tables
SPECIAL FEATURE: GETTING TO GRIPS WITH PENSION SAVINGS: The UK government is failing to boost pension savings leaving providers to fill in the gap; Providers can seize opportunities where the government has failed; The government hopes that personal accounts will address the problem of long-term retirement savings; The public sector pension reform is a slow and controversial process and may not boost pension savings; Government focus will renew interest in pension savings helping providers as well; There are doubts as to whether personal accounts will hit the target; The government is continually showing a lack of continuity on pension policy, undermining its importance; Leveling down employers' contribution will make pension provision worse; The government should still ensure that it pays to save against the impact of means-testing; Employers may be tempted to minimize costs of personal accounts through lower employee salaries; However, a contributions ceiling has been set to prevent the weakening of existing pensions provision; The effectiveness of personal accounts is uncertain and the market continues to polarize between stakeholder and SIPP pensions; Providers can win new business in the middle market with SIPPs; Offering low-cost SIPPs presents an opportunity; Low-cost and vanilla SIPPs will meet the needs of the 'recessionary consumer'; New SIPP powers to hold protected rights will increase flexibility and investment choice for consumers; However, a SIPP mis-selling scandal may come to pass if greater clarity is not introduced to the market; Recent economic troubles may prove disastrous for SIPPs; Providers can capitalize further from SIPPs by distributing them on an efficient wrap platform; The increasing interest in SIPPs does not necessarily signal an end for personal and stakeholder pensions; Providers should focus on a more relevant retirement planning system by addressing market conditions and demographics; A more flexible retirement planning program is needed to make the pensions industry more viable and sustainable; Current property and equities market presents huge buying opportunities for starting a pension; Variable annuities are increasingly becoming part of a retirement and investment plan; Combining variable annuities with a SIPP will give investors an ideal balance for their retirement strategy; There are currently alternatives to pension saving, the choice of which is dependent on investor attitude and preferences; Individual savings accounts; Venture capital trusts; Provider strategies for product diversification and redesign need to be examined to address the barriers to save; Affordability is an obstacle amongst most non-savers; Targeted marketing, rather than new product development, must be the focus; Providers and advisors should support people to exercise personal responsibility; People should be encouraged with a long-term view of pension savings; Providers should take note of the need for a 'Money Guidance' service for greater consumer access to retirement planning tools; Providers must communicate with advisors more readily
MARKET CONTEXT: The dominance of personal pensions has been overshadowed by the rise of SIPPs; Despite the dominance of personal pensions, SIPPs have experienced the most impressive year-on-year growth over the last five years; SIPPs continue to be the most popular product in the regular premium pension market; Investor desire for self-control has been a driver for choice of product; A clear definition of SIPPs is necessary to ensure that distributors do not sell an incorrectly defined product; Group SIPPs are expected to flourish but their emergence should be approached with caution; The group SIPP market offers members a flexible and engaging product, with a range of investment options tailored to suit the different needs of members; There remain differences of opinion in the industry about the group SIPP product; Industry views of a group SIPP proposition depend on the provider's existing market; IFAs are the dominant distribution channel for pension products; IFAs are well-established in the pensions market but many are shifting their focus up market; SIPPs require a clear and transparent charging structure to engage with changing regulatory requirements; Online distribution remains a promising area in the individual pensions market; Wrap platforms may soon reach a proliferation peak; The RDR is the main piece of distribution regulation in the market; The RDR will increase the quality of advice and promote transparency of charges in retirement planning; The RDR initiative aims to address current market failures; The latest proposal outlines a clear distinction between 'sales' and 'advice'; Customer agreed remuneration will allow competitive forces to work in favor of consumers; AEGON heads the competition in the single and regular premium pensions market; AEGON dominates the pensions market in both the single and regular premium pensions in 2007; The company has secured distribution deals to increase market share; AEGON has combined its individual and corporate pensions businesses; AEGON has achieved numerous awards in 2008; Many competitors have focused their energy on their SIPP offerings; Prudential has brought a new flexible SIPP to the market in partnership with Cofunds; Standard Life allows SIPPs to access its FundZone fund supermarket; Standard Life has also committed resources towards helping advisors with SIPPs; An increasing number of non-insured SIPPs from non-life companies are in force in the market; Hargreaves Lansdown has become a leading non-life SIPP provider with its Vantage SIPP; A J Bell has put significant attention towards SIPPs and offers three plans to investors; Market forecasts; SIPP products will shape the pensions market at the expense of stakeholder and personal pensions; Group personal pensions are forecasted to dominate the regular premium pensions market
APPENDIX: Data; Definitions; Single premium policy; Regular premium; New business; Life based savings products; In-specie contribution; Pension product definitions; Personal pensions; Stakeholder pensions; Group personal pensions; DSS rebates; Employer sponsored stakeholder pension (ESS); SIPPs (self invested personal pensions); ABI definitions of distribution channels; Independent financial advisors (IFAs); Direct sales forces; Tied agents; Multi-tied agents; Bancassurance; Direct marketing; Other; Further reading; Ask the analyst; Datamonitor consulting; Disclaimer
List of Tables: Table 1: Single premium pensions new business, £m APE, 2003-07; Table 2: Regular premiums pensions new business, £m APE, 2003-07; Table 3: Forecast single premium pensions new business, £m APE, 2008-12; Table 4: Forecast regular premium pensions new business, £m APE, 2008-12; Table 5: Total single and regular premium pensions new business by distribution, £m APE, 2003-07; Table 6: Single premium pensions new business for the top ten life companies, £m APE, 2003-07; Table 7: Regular premium pensions new business for the top ten life companies, £m APE, 2003-07
List of Figures: Figure 1: Advisors desire more communication with providers; Figure 2: Personal pensions and SIPPs dominate single premium pension sales in 2007; Figure 3: SIPPs have experienced a CAGR of 203% in the regular premium pensions market; Figure 4: IFAs dominate the distribution of pension products; Figure 5: The market for single premium pensions is dominated by AEGON; Figure 6: AEGON heads the group of leading regular premium pension providers in 2007; Figure 7: The SIPPs market will see a slight increase in non-insured SIPPs business over the next five years; Figure 8: The single premium pensions market is forecast to remain static over the next 5 years; Figure 9: Regular pensions sales will rise by a CAGR of 6% between 2008 and 2012

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