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Published by: Mintel International Group Ltd.
Published: Feb. 1, 2006 - 95 Pages
Table of Contents
- Introduction and Abbreviations
- Key Sources
- Global information and research
- Consumer research
- ACORN
- Abbreviations
- Executive Summary
- Changing demographics are a key driver behind new legislation
- Sales of new individual pension contracts continue to decline
- Aviva replaces Standard Life as leading pensions provider for 2004
- Media coverage may help compensate for low advertising expenditure
- The pensions industry still suffers from lack of trust
- Post-A-day
- Market Background
- The legislative foundation of the UK pensions system
- Figure 1: Pensions legislation timeline, 1908-2004
- A new focus
- The ins and outs of A-day
- More generous allowances
- Figure 2: Current annual contribution limits for personal and stakeholder pensions, by age at start of tax year, 2005
- Figure 3: Expected annual contribution limits for individuals from 6 April 2006
- Figure 4: Expected lifetime allowance limits for individuals from 6 April 2006
- Occupational scheme members will be able to contribute to other pensions
- Raising the retirement age
- Tax-free lump sum
- Alternatives to annuities
- Triviality
- Closing loopholes
- SIPPs: the build-up and the U-turn
- The Turner Report
- Figure 5: Key proposals and conclusions of the Pensions Commission, 2005
- Working for longer
- Soft compulsion
- Pension reform outside the UK
- Figure 6: Examples of recent pension reforms outside the UK, 2005
- Market Drivers
- Demographic factors
- The savings ratio is expected to continue its climb upwards
- Figure 7: PDI, consumer expenditure, savings and the savings ratio, 2000-10
- Ageing population
- Figure 8: UK population trends, by age group, 2004-29
- Increasing longevity poses a problem for everyone
- Figure 9: Expected further number of years of life, by gender at ages 55 and 65, 1981-2040
- External factors
- Stockmarket volatility adds to suspicion of pensions
- Figure 10: FTSE 100 index, January 1996-December 2005
- Falling yields pose a serious problem
- Figure 11: Consolidated stock average annual gilt yield, 1900-2005
- Figure 12: Largest FTSE 100 company pension deficits as at 30 June 2005
- Annuity rates continue to suffer
- A paltry state pension is what non-savers can look forward to
- Figure 13: Weekly state pension levels, 2005/06 tax year
- Consumer-based issues
- Instant gratification culture conflicts with savings activity
- Perceptions towards pensions
- Figure 14: ‘A pension is the best way to save for retirement’, December 2005
- Property and pensions
- Figure 15: Attitudes towards owning property as an investment, December 2004
- Market Size and Trends
- 17 million pension holders may be affected by rule changes
- Figure 16: Estimated number of consumers with pension provision, December 2005
- Greater contributions, fewer contracts
- Figure 17: Index of new individual pension business, regular and single premium, by volume and value, 2000-05
- Average contributions are higher in Q3 2005
- Figure 18: Average regular-premium contributions, by type of individual pension, Q3 2003-Q3 2005
- Personal pension sales have declined steadily over last five years
- Figure 19: New regular-premium personal pension business, by volume and value, 2000-05
- The value of the GPP market has increased despite declining sales
- Figure 20: New group personal pension business, by volume and value, 2000-05
- Stakeholder sadness
- Figure 21: New regular-premium stakeholder pension business, by individual and employer-sponsored, 2001-05
- Number of new SIPPs contracts skyrockets over last four quarters
- Figure 22: New regular-premium SIPPs business, by volume and value, 2000-05
- £1.2 billion was sunk into single-premium SIPPs in first three quarters of 2005
- Figure 23: New single-premium SIPPs, by volume and value, 2000-05
- Compulsion has driven sales of annuities, but for how much longer?
- Figure 24: New pension annuity business, by volume and value, 2000-05
- Key Players and the Competitive Environment
- Aviva surpasses Standard Life to become market leader in 2004
- Figure 25: Top 20 players in the UK’s individual pensions business, based on net written premiums, 2003 and 2004
- Pensions market is showing signs of consolidation
- Figure 26: Market share of individual pension business, based on net written premiums, 2003 and 2004
- IFAs will also be affected by A-day
- Figure 27: Top ten pensions IFAs, by share of turnover, 2004
- Distribution and the Internet
- IFAs are responsible for an increasing proportion of new business
- Figure 28: Distribution of new individual pension APE premiums, by distribution channel, 2000-05
- Non-intermediated sales of new pension annuities are on the rise
- Figure 29: Distribution of new pension annuities and income drawdown APE premiums, 2000-05
- The Basic Advice process will remain unaffected
- The availability of free advice may also stimulate sales
- The Internet will continue to be a source of information
- Figure 30: Purchasing financial products and services over the Internet, December 2005
- Advertising and Promotion
- Adspend on SIPPs triples as A-day approaches
- Figure 31: Advertising expenditure on pensions, by pension category, 2000/01-2004/05
- Four in ten leading pensions advertisers are IFAs
- Figure 32: Advertising expenditure on pensions, by provider, 2000/01-2004/05
- Three quarters of pensions advertising expenditure goes to press adverts
- Figure 33: Advertising expenditure on pensions, by outlet, December 2004-November 2005
- Extensive media coverage has helped to increase awareness of A-day
- The Consumer and Product Ownership
- More than half of non-retired adults are unpensioned
- Figure 42: Pension ownership, December 2005
- Tuning out
- Pension provision is clearly skewed towards the more affluent
- Figure 43: Pension ownership, by gender, age, socio-economic group and region, December 2005
- What rule changes?
- Figure 44: Attitudes towards saving in a pension, December 2005
- One in three disagree that pensions are the best way to save for retirement
- Figure 45: ‘A pension is the best way to save for retirement’, by gender, age, socio-economic group and region, December 2005
- Those with alternative investments are most leery of pensions
- Figure 46: ‘A pension is the best way to save for retirement’, by working status, gross annual household income, tenure and pension provision, December 2005
- A significant degree of unawareness surrounds A-day
- Figure 47: ‘I am aware that the rules regarding pensions will be changed next April’, by gender, age, socio-economic group and region, December 2005
- One in three personal pension holders are in the dark about impending changes
- Figure 48: ’ I am aware that the rules regarding pensions will be changed next April’, by working status, gross annual household income, tenure and pension ownership, December 2005
- Women are more willing than men to work longer, regardless of age
- Figure 49: Willingness to work longer in order to secure a higher retirement income, by gender and age, December 2005
- ABs are less likely to agree that they are willing to work longer
- Figure 50: Willingness to work longer in order to secure a higher retirement income, by gender and socio-economic group, December 2005
- Those without pension provision are more willing to work for longer
- Figure 51: Willingness to work longer in order to secure a higher retirement income, by gender and pension ownership, December 2005
- The Future
- After the dust settles
- Simpler…or not so?
- Taking advantage of the more generous allowances
- Removal of concurrency restrictions may help boost sales
- More flexible benefit taking may attract new investors
- SIPPs will still be ‘sexy’
- Challenges will remain
- Forecast
- The value of new regular-premium pensions will top £3 billion in 2010
- Figure 67: Forecast of new regular-premium individual pensions business in the UK, 2005-10
- Single-premium sales to strengthen post-A-day
- Figure 68: Forecast of new single-premium individual pensions business in the UK, 2005-10
- Factors incorporated in the forecast
AbstractWith an ageing population, increasing longevity, extensive media coverage regarding pensions and the savings gap, a relatively low base interest rate encouraging spending, a strong distrust of financial services companies and the phasing out of final salary pensions, the drivers underlying the pensions market are complex. The rules that currently govern the pensions system are especially complicated, and it is argued that they might actually discourage investment in pensions.
On 6 April 2006, also known as A-day, a new set of pensions rules will come into effect, replacing the eight sets of rules that currently govern the UK’s pensions system. These new rules will ‘simplify’ the system by establishing a single tax regime, and it is widely believed that the new rules will give consumers greater choice when investing in pensions, which will ultimately increase sales of pensions.
Indeed, consumers will have more flexibility with how they save into a pension, how much they save into a pension and how the benefits are drawn at retirement.
The goal of this report is to assess the impact of A-day. After outlining the key changes that take place on A-day, this report identifies the key drivers of the individual pensions market, evaluating how these factors are likely to affect the pensions market in the future. The size of the pensions market is presented and broken down by product, while sales trends are identified and examined. The report then highlights the key pensions providers, as well as the leading IFAs in terms of pension-related turnover, later focusing on distribution trends. Advertising activity, the impact of the media and overall consumer financial activity are also taken into consideration.
Central to the theme of this report is Mintel’s exclusive consumer research. An initial sample of 2,014 adults aged 16+ were questioned about pension ownership, their attitudes towards pensions and the factors that would encourage them to save more in a pension. The research also assessed their knowledge of the upcoming changes, and gauged their opinion of some of the proposals put forth by the Pension Commission’s report (also known as the Turner report). The results are presented in analysed in two separate sections of the report.
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