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Published by: Mintel International Group Ltd.
Published: May. 1, 2006 - 103 Pages
Table of Contents
- INTRODUCTION AND ABBREVIATIONS
- Providers and individuals embraced SIPPs in the run up to A-day
- Report contents
- Global information and research
- Consumer research
- ACORN
- ABBREVIATIONS
- EXECUTIVE SUMMARY
- New but slow-flowing investment will be encouraged because of A-day
- The number of new SIPP sales rose by 972% between 2004 and 2005
- Figure 1: SIPPs, number of new individual contracts, 2001-05
- EPP contributions stood at £26 billion in 2005
- James Hay was the largest SIPP provider in 2005
- Figure 2: Leading SIPP providers, by number of in-force plans, 2005
- IFAs are the key distributors for individual premium pensions
- ABs value pension features which were traditionally associated with premium pensions
- BACKGROUND AND DEFINITIONS
- Market foreword
- Government reform will continue post-A-day
- Residential property
- Figure 3: Property legislation for pensions, March 2006
- Finance Bill 2006
- SIPPs will be regulated from April 2007
- Annuity deferral
- Implications of the Turner Report
- Executive pay is on the up
- Marketable wealth in the UK
- Figure 4: Share of marketable wealth, 2002
- Private pensions accounted for 32% of household income for pensioners in 2003
- Figure 5: Analysis of household income for pensioners (aged 65-74), 2002/03
- MAIN PRODUCT DEFINITIONS FOR PREMIUM PENSIONS
- MARKET FACTORS
- An ageing population will place pressure on public and private resources
- Figure 6: Population growth estimates, by age group, 2004-29
- A growing stock market might lead to increased confidence
- Figure 7: FTSE 100 and FTSE All Share indices, January 1996-January 2006
- Base rate stability has given some certainty to financial planning
- Figure 8: BoE interest rates, January 1992-January 2006
- Property is a serious proposition
- Figure 9: Average house prices, 1970-2005
- There is a growing willingness among the public to save
- Figure 10: PDI, consumer expenditure, savings and the savings ratio, 2005-10
- Higher earners were the most confident group
- Figure 11: Consumer confidence, by income band, July 2002-January 2006
- The AB group will grow in number over the next few years
- Figure 12: Number of individuals in the AB socio-economic group, 2005-10
- The number of self-employed will grow to 394 million by 2010
- Figure 13: Number of self-employed, 2005-10 480,000 individuals will earn £100,000 or more in the 2005/06 tax year
- Figure 14: Income tax liabilities, by income range, 2005/06
- PRODUCT DEVELOPMENT
- Contribution limits and the LTA
- Figure 15: Annual contribution limit and statutory lifetime allowance, 2006/07-2010/11
- The group SIPP concept grows more popular
- Permissible pension investments
- Figure 16: Tax-efficient and permissible investments, March 2006
- ASPs may be used to extend relationships with customers
- Figure 17: Selected pension terms, March 2006
- Transfer of accrued pension rights
- Trustee issues
- Figure 18: Trustee issues following legislation, March 2006
- Types of premium pension products
- Executive pension plan
- Pre-A-day
- Free-standing additional voluntary contributions
- Pre-A-day
- Description of unapproved schemes
- Funded unapproved retirement benefit scheme
- Pre-A-day
- Secured unfunded unapproved retirement benefit scheme
- Pre-A-day
- Self-invested personal pension
- Small self-administered scheme
- Pre-A-day
- Stakeholder pension
- Trustee investment plan
- Pre-A-day
- Unfunded unapproved retirement benefit scheme
- Pre-A-day
- Defined contribution schemes come to the fore
- Pension term assurance products
- MARKET SIZE
- There was a ’last minute’ rush to invest
- Group SIPPs
- The value of new EPP business was £26 billion in 2005
- Figure 19: Total value of new EPP business (including SSASs and TIPs premiums), by single- and regularpremium value, 2001-05
- Single-premium EPP investment stood at £717 million in 2005
- Figure 20: Volume and value of new EPP contracts, by regular and single premiums, 2001-05
- SIPPs experienced substantial growth in 2005
- Figure 21: Volume and value of new SIPP contracts, by regular and single premiums, 2001-05
- BTL, SIPPs and the Treasury
- Regular SSAS business has been in decline
- Figure 22: Volume and value of new SSAS contracts, by regular and single premiums, 2001-05
- The number of FSAVC regular-premium contracts rose by 139% in 2005 compared with figures shown for 2004
- Figure 23: Volume and value of new FSAVC contracts, by regular and single premiums, 2001-05
- SHP regular-premium business declined by 82% between 2001 and 2005
- Figure 24: Volume and value of new SHP contracts, by regular and single premiums, 2001-05
- Further opportunities around A-day
- KEY PLAYERS
- New entrants are preparing to battle with the incumbent players
- James Hay was the largest SIPP provider in 2005
- Figure 25: Leading SIPP providers, by volume and value of in-force plans, 2005
- Larger players might expand at the cost of smaller players
- EPP market share
- Figure 26: Market share, EPP providers, 2004
- SSASs were overshadowed by the SIPP
- Figure 27: Leading SSAS providers, by number and value of schemes, 2005
- DISTRIBUTION AND ADVICE
- Bancassurance accounted for only 5% of EPP distribution share in 2005
- Figure 28: Proportional distribution of new EPP business, 2001-05
- The IFA channel is the largest for SIPP distribution
- Figure 29: Proportional distribution of new SIPPs, 2001-05
- SSAS distribution
- Figure 30: SSAS distribution, key providers, 2005
- Lifetime advice is of most value to more affluent individuals
- Figure 31: Advice concept for IFAs, March 2006
- A two-tier concept
- Figure 32: Levels of advice through a two-tier pricing system, March 2006
- Non-technology advice will stipulate higher fees
- ADVERTISING AND PROMOTIONAL ACTIVITY
- Finding a point of difference post-A-day
- SIPPs advertising expenditure increased significantly pre-A-day
- Figure 33: Total advertising expenditure on pension products, by sector, 2005
- Press advertising represented 79% of total pensions expenditure in 2005
- Figure 34: Distribution of total pensions advertising expenditure, by media type, 2005
- Direct mail accounted for 9% of SIPP advertising spend in 2005
- Figure 35: Proportional distribution of SIPP advertising expenditure, by outlet type, 2004 and 2005
- Hargreaves Lansdown was the largest SIPP advertiser in 2005
- Figure 36: Largest SIPP advertisers, 2005
- Prudential was the top pensions advertiser in 2005
- Figure 37: Major pensions advertisers, 2005
- THE CONSUMER
- Consumers most valued control over their pension
- Figure 38: Preference for pension features, February 2006
- ABs most favour features available via premium pensions
- Figure 39: Preference for pension features, by gender, age, socio-economic group and marital status February 2006
- Implications
- The next generation of more affluent pension investors favoured Internet services
- Figure 40: Preference for pension features, by lifestage, age/socio-economic group, working status and TV region, February 2006
- Implications
- Broadsheet readers are a key target group
- Figure 41: Preference for pension features, by new technology users, newspaper readership, commercial
- TV viewing and supermarket usage, February 2006
- Implications
- A tenth of consumers would approach a provider direct to arrange a pension
- Figure 42: Method of pension arrangement, February 2006
- Relatively wealthy individuals were more likely to seek advice
- Figure 43: Method of pension arrangement, by gender, age, socio-economic group and lifestage, February 2006
- Implications
- Wealthy Achievers favoured the IFA route
- Figure 44: Method of pension arrangement, by age/socio-economic group, gross annual household income TV region and ACORN category, February 2006
- Implications
- Features such as free and unlimited investment switching might appeal to some financially astute individuals
- Figure 45: Method of pension arrangement, by new technology users, newspaper readership, commercial
- TV viewing and supermarket usage, February 2006
- Implications
- Consumers perceive employers as key to pensions provision
- Figure 46: Cross-analysis of pension source and pension features, February 2006
- Trade view on valued pension features and pension sourcing
- THE FUTURE
- Self-investment options grow
- Lifetime relationships will now be formed
- New legislation will be gradually introduced over the next few years
- Group SIPPs will become a staple option for employers
- Larger players take control of this market
- FORECAST
- Figure 47: Forecast of value of new SIPP contracts, by single and regular premiums, 2005-11
- FACTORS USED IN THIS FORECAST
- APPENDIX: RESEARCH METHODOLOGY
AbstractThis report covers the premium pensions market in the UK. For the purposes of this report premium pensions are defined as pensions, which are suitable for more affluent individuals. In writing this report, Mintel has questioned key premium pensions providers to establish trends and gather in-depth information about this market. This report is published in the period in which new legislation will be applied to the wider pensions field. In this regard, this report presents a transitional view of the premium pensions market.
In 2006, the largest issue for pensions providers has been the implementation of new pensions legislation, which came into force on 6 April. These new regulations aim to simplify pensions to the extent that the long-standing eight tax regimes have been replaced with a single set of tax legislation, there are now set contribution limits applicable to all individuals and pension holders are no longer required to compulsorily take-up an annuity on reaching retirement age. In regard to premium pensions, it seems that these changes are broadly beneficial for more affluent individuals. Issues of interest around the introduction of the new government legislation are analysed throughout this report.
In the run-up to A-day, pensions providers and advisers toiled to maintain their customers' tax advantages by protecting entitlements in now older style schemes such as executive pension plans (EPPs) and small self-administered schemes (SSASs). This resulted in significant volume and value increases in business for some premium pensions sectors in 2005. These sectors are identified and looked at it detail in the Market Size section.
While the loss of tax-exempt residential purchasing rights and restricted borrowing of 50% of net fund value appear to have been key issues for the self-invested personal pension (SIPP) sector pre-A-day, they are unlikely to dissuade more affluent individuals from using a SIPP (or an similarly structured product) as their main pensions wrapper. With a wide application, flexibility of investment choice, potentially low charges and a simple design the SIPP seems to have become the product of choice for more affluent consumers and premium pensions providers. Issues in relation to SIPPs and up-and-coming premium pension products are examined in the Product Development section.
In consumer research conducted for this report a fifth of respondents said that they favoured flexibility around pension fund transfers. This feature has traditionally been associated with premium pensions but it may become more widely desired through simplified pension products post-A-day. These and other issues are looked at in the Consumer section.
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