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UK Life and Pensions Distribution Overview 2008

Datamonitor
February 18, 2009
13 Pages - SKU: DFMN2150977

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Countries covered: United Kingdom

Introduction

This report looks at the salient points from the FSA's Retail Distribution Review and provides data on how products are distributed in in the key areas of the life and pensions market

Scope

This reports highlights the key findings of the RDR, outlines the responses to the FSA's report and provides Datamonitor's view of the findings
The report provides historic and forecast data on how products are distributed through IFA and bancassurance channels

Highlights

The Retail Distribution Review was published by the FSA in November 2008, nearly 3 years after its inception. During the 3 year consultation period discussions were held with all key stakeholders in the distribution world, needless to say the publication has created new controversy and created winners and losers.

Regulatory changes are an opportunity for IFAs to design their future. With focus now on the advice & service offered, the product becomes less important and the level of investment service the advisor provides defines the segment. Consumers are less willing to take things on trust highlighting the importance of changing business models even more.

Reasons to Purchase

Obtain an overview of the findings of the RDR with an concise outline of the key criticism and suggestions for improvement
Access historic and forecast data on the distribution of life and pensions products in the UK

Overview: Catalyst; Summary; Table of Contents; Table of figures; Table of tables; Retail Distribution Review; The key elements of the RDR; Improved clarity of services was a key aim of the RDR; Remuneration will become less open to influence by providers; Standards of professionalism in the industry will be improved; The RDR development process continues; Responses to the RDR have been mixed; Key criticisms of the RDR are that it hasn't fulfilled the clarity it promised to deliver
Datamonitor view of the RDR reforms: Product Distribution through the IFA CHannel; The IFA channel accounts for nearly half of total life and pensions sales in the UK; The total regular premium life market has declined by a compound annual rate of 9%; Term assurance dominates regular premium life sales by IFAs; The market for endowments has collapsed; Savings-related term has withstood market pressures, despite mortgage-related sales being strongly impacted by the housing market; Total single premium life market has grown by an annual compound rate of 24.1%; Unit-linked bonds dominate the single premium life market for IFAs, although there has been strong growth in guaranteed bonds; Guaranteed bonds have grown in popularity with IFAs, fuelled by withdrawals from equity investments; Personal pensions dominate the pensions market in terms of new business from IFAs; SIPPs continue to be the most popular pensions product among IFAs; Despite the dominance of personal pensions, SIPPs have experienced the most impressive year-on-year growth over the last five years; A clear definition of SIPPs is necessary to ensure that IFAs do not sell an incorrectly defined product; Appropriate segmentation and targeting of SIPPs can help IFAs boost take-up and retention; The financial advisor channel is forecast to remain dominant going forward; Sales of savings-related term assurance by IFAs is forecasted to dominate the regular premium life market; Differing views exist as to the impact of the economic downturn on protection sales
Datamonitor forecasts unit-linked bonds to continue their lead in single premium life sales by IFAs, although guaranteed bonds will increase in popularity: Guaranteed bonds are positively impacted by their guarantee element and CGT changes; Group personal pensions are forecasted to dominate the regular premium pensions market; The market will increasingly be shaped by SIPP products at the expense of stakeholder and personal pensions; Product Distribution through Bancassurance; The bancassurance channel has failed to challenge the dominant IFAs; The current bancassurance single premium life market is dominated by unit-linked and guaranteed bonds; Unit-linked bond products complement the bancassurance model with their simplicity; Bancassurance is growing stronger in guaranteed bonds fuelled by withdrawals from equity investments; Regular life premiums for bancassurers have been adversely affected by the mortgage crisis; The collapse of the endowment market has taken its toll on regular premiums; Savings-related term has withstood market pressures, despite mortgage-related sales being impacted by the housing market; IP and CII premiums have also suffered although they account for a very small percentage of bancassurers' regular life business; Bancassurers have not been able to increase their pensions business over the last 5 years; Single premium income has been helped by the increasing popularity of SIPPs and bancassurers have taken their share; Stakeholder pensions dominate the bancassurers' single and regular premium pensions income
APPENDIX: Product definitions; Life-based savings products; Life assurance; Single premium life; With-profit bond; Unit-linked bond; Income and growth bonds; Guaranteed equity bonds; Distribution bonds; Purchased life annuities; Other bonds; Annual premium life; Endowment policy; Whole of life insurance; Term assurance; Income protection; Critical illness; Collective life; ISAs; Personal pensions; Stakeholder pensions; Group personal pensions (GPPs); DSS rebates; Employer-sponsored stakeholder pension (ESS); SIPPs (Self Invested Personal Pensions); FSAVC (Free-Standing Additional Voluntary Contributions); ABI definitions of distribution channels; Independent financial advisors (IFAs); Direct sales forces; Tied agents; Multi-tied agents; Bancassurance; Direct marketing; Telesales; Other; Further reading; Ask the analyst
Datamonitor consulting: Disclaimer
List of Tables: Table 1: Total life and pensions new business by distribution channel, £m APE; Table 2: Total regular premium life new business premiums segmented by distribution channel, £m APE; Table 3: Regular premium life sales by IFAs, £m APE; Table 4: Total single premium life sales segmented by distribution channel, £m APE; Table 5: Single premium life sales through the IFA channel, £m APE; Table 6: Regular premium pension sales by IFAs, £m APE; Table 7: Single premium pension sales by IFAs, £m APE; Table 8: Forecast total life and pensions sales by distribution channel, 2008-2012, £m APE; Table 9: Forecast regular premium life market new business premiums, 2008-2012, £m APE; Table 10: Forecast single premium life market new business premiums, 2008-2012, £m APE; Table 11: Forecast regular premium pensions new business premiums through IFAs, 2008-2012, £m APE; Table 12: Forecast single premium pensions new business premiums, 2008-2012, £m APE
List of Figures: Figure 1: FSA diagram of new investment distribution framework; Figure 2: Financial advisors dominate the sale of life and pensions products; Figure 3: Protection and mortgage-related term dominate regular premium life sales through the IFA channel; Figure 4: Unit-linked bonds account for 59% of total single premium life sales through the IFA channel; Figure 5: Group personal pensions dominate sales by IFAs in the regular premium market; Figure 6: Personal pensions continued to dominate the single premium pensions market in 2007; Figure 7: The regular premium life market will see slender growth over the next five years; Figure 8: Unit-linked bonds will still command single premium life sales by IFAs over the next five years; Figure 9: Regular pensions sales through IFAs will rise by a compound rate of 6% between 2008 and 2012; Figure 10: The single premium pensions market through IFA sales will remain static between 2008 and 2012; Figure 11: Bancassurers' mix of life and pensions business has not gained momentum; Figure 12: Bancassurers have focused their sales efforts on unit-linked and guaranteed bonds; Figure 13: The mortgage crisis has taken its toll on regular premiums sold through bancassurers; Figure 14: Banks have not been able to increase their share of the pensions market between 2003-2007; Figure 15: SIPPs and stakeholder pensions are the two most important single premium pension income generators for bancassurers; Figure 16: Stakeholder pensions dominate the bancassurers' regular premium income in 2007

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UK Life and Pensions Distribution Overview 2008

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