Securing New Business in the UK Pensions Market

Published by: Mintel International Group Ltd.

Published: Feb. 1, 2007 - 113 Pages

Table of Contents

Issues in the Market

Key issues

Market definitions

The State System

The voluntary private funded sector

Figure 1: Types of private pension provision, UK

Abbreviations

Market in Brief

At the heart of the matter

An improving savings and investment climate

New proposals announced to boost participation

Competitive forces at play

Legislative changes boost pension transfers and new sales

Contributions are also up

IFAs produce the lion’s share of business

Contraction in supply

Advertising activity boosted by rising demand

Nearly half of all non-retired adults are saving in a pension

Public opinion of pensions is fairly low…

… but there is promising support for personal accounts

Winning over non-pension savers

Broader Market Environment

Key points summary:

The ‘demographic time bomb’

Implications

Changing work patterns

Implications

Economic backdrop

Implications

Stronger growth for savings forecast

Figure 2: Total PDI, consumer expenditure and savings, 2002-11

Implications

Recent stockmarket woes still resonate…

Final-salary scheme closures

Crisis in confidence

… although the Footsie continues on an upward path

Figure 3: FTSE 100 and FTSE All Share - daily index movements, December1999-December 2006

Broker predictions are cautiously positive

Internal Market Environment

Key points summary:

Pension participation is declining, when it should be increasing

Current private pension coverage

Figure 4: Participation in private pension schemes, November 2006

Alternative arrangements

Reasons behind lack of pension provision

Psychological barriers

An issue of trust

Physical barriers

Affordability

Consumer apathy

Lack of understanding

Pensions reform

Pensions Bill

Second Pensions White Paper

Personal accounts - a new mechanism for saving

Low charges are unworkable, say pensions industry

Positive implications

Employer opposition

Complement, not compete

Some existing schemes could move upmarket

But others could trade down

Pensions simplification and a new tax regime

Implications and expectations

Immediate effects

Inheritance tax U-turn

Proposals reduce the appeal of family SIPPs

Competitive Context

Key points summary:

Pensions compete with a host of other financial priorities

Figure 5: Contextual model for private pensions - money flows

Pension alternatives

Figure 6: Retirement funding strategies

Strong growth in second property market

ISAs are another popular retirement saving vehicle

Using the business to fund retirement

Limited options for those without retirement savings

The core challenge is one of persuasion

Strengths and Weaknesses in the Market

Figure 7: The UK pensions market - key strengths and weaknesses, 2006

Complexity

Increased costs

Stakeholder pensions fail to hit the mark

Compulsory enrolment

The Non-Saver Target Market

The size of the target audience for personal accounts

Figure 8: The size of the non-saver target market, November 2006

Exemptions

Market Size and Forecast

Key points summary:

Employer pension contributions have increased strongly…

Figure 9: Contributions to private pension schemes - UK, 2001-05

… but individuals need to contribute more

New individual pensions sales storm ahead in 2006

Figure 10: Individual pension sales, 2001-06

Factors behind the growth

Record year for SIPP providers

Moving into the mainstream

Steady growth forecast

Figure 11: Forecast of individual pension sales, 2006-11

The group single-premium sector sees impressive growth

Figure 12: Group pension sales, 2001-06

Growth areas

Single-premium group sales are set to rise further

Figure 13: Forecast of group pension sales, 2006-11

Factors incorporated

Market Share

Key points summary:

The changing composition of the market

A banking offensive

Standard Life tops the new pensions business rankings

Figure 14: Top ten UK pensions providers, by new premium income, 2005

Changes to top five

New pensions business boosted by A-Day changes

Companies and Products

Winning products

SIPPs: the vehicle of choice for consolidating multiple pension funds

Profiles of the top five largest pensions providers

Standard Life

Scottish Widows

Norwich Union

AEGON Scottish Equitable

Friends Provident

Brand Communication and Promotion

Key points summary:

The importance of branding

Establishing a relationship with the target market

A successful brand can help new business acquisition

Use of consumer advertising is fairly limited…

…but it is on the increase

Figure 15: Total advertising expenditure on selected pension products, 2002-06

Adspend is concentrated on the press

Figure 16: Proportional distribution of pensions adspend, by media type, 2002-06

Scottish Widows was the leading pensions advertiser in 2006

Figure 17: Advertising expenditure by the top ten pensions advertisers, 2005 and 2006

Channels to Market

Key points summary:

Most pension business is sold with advice

Individual pension sales via bancassurance route more than double in 2006

Figure 18: Individual pensions premiums, by sales channel, 2001-06

Bancassurance model proving successful

Single-tie channel recovers its share of new regular premiums in 2006

Figure 19: Proportional distribution of individual regular-premium business, by sales channel, 2001-06

Direct sales account for a very small proportion of new single premiums

Figure 20: Proportional distribution of individual single-premium business, by sales channel, 2001-06

IFAs help drive group pension sales in 2005-06

Figure 21: Group pensions premiums, by sales channel, 2001-06

IFA channel picks up share of new group regular premiums in 2006

Figure 22: Proportional distribution of group regular-premium business, by sales channel, 2001-06

Direct sales continue to recede in the single-premium group sector

Figure 23: Proportional distribution of group single-premium business, by sales channel, 2001-06

The Consumer - Pension Participation

Key points summary:

Survey background

Just over half of all non-retired adults are not saving in a pension

Figure 31: Proportion of adults contributing to a pension, by type of scheme, November 2006

Options for leavers

The gender divide

Figure 32: Proportion of adults making pension contributions, by gender, age, socio-economic group, marital status and lifestage, November 2006

Pension participation is highest among the middle-to-high age groups

Single people are least likely to have pension savings

Pension participation increases up the socio-economic scale

Working status and wealth heavily determine take-up

Figure 33: Proportion of adults making pension contributions, by working status, household income, tenure, region and ACORN category, November 2006

Regional variations

Most pension holders are saving less than £100 a month…

Figure 34: Pension-holders’ monthly contributions, by type of pension, November 2006

Implications

…but the majority say that they could contribute more

Figure 35: Proportion of pension holders who could afford to save more, November 2006

Additional analysis

The Consumer - Attitudes and Expectations

Key points summary:

Coming up

Many people are put off by ever-changing pension rules

Figure 36: Views on retirement and pension rules, November 2006

Implications and opportunities

One in four pension savers worry about how they’ll manage financially when they retire

Implications and opportunities

Most non-pension savers do not want to work beyond age 60/65

Implications and opportunities

3 million can’t afford to retire

Figure 37: Cross-analysis - views on retirement and pension rules, November 2006

The closer people get to retirement, the more they are likely to worry

Figure 38: Views on retirement and pension rules, by gender, age, socio-economic group, working status, household income and region, November 2006

Less than a third of non-retired adults believe a pension is the best way to save for retirement…

… while two fifths think pension income shouldn’t be taxed

Figure 39: Agreement with statements about pensions, November 2006

Implications and opportunities

Confidence lost

Is property a better bet?

Some support for compulsion

Means testing - striking the right balance

Figure 40: Cross-analysis - agreement with statements about pensions, November 2006

Opportunity to restore public faith in pensions

Government still needs to iron out confusion over means testing

ABs and Londoners are most pro compulsion

Figure 41: Agreement with postive statements about pensions, by gender, age, socio-economic group, working status, household income and region, November 2006

More support for pensions in the South

Few are aware of, or value, tax relief on contributions

Women have greater confidence in pension companies than men

Figure 42: Agreement with negative statements about pensions, by gender, age, socio-economic group, working status and region, November 2006

Self-employed favour property over a pension

Two in three of those in the £35K-50K income group think that taxing pension income is unfair

A much greater proportion like the idea of a national pension scheme than dislike it

Figure 43: Attitudes towards personal accounts, November 2006

A minority of existing pension savers express interest in transferring into the new scheme

Some are concerned about the cost implications

Personal account typologies

Figure 44: Population segmented by attitudes towards personal accounts, November 2006

Typology make-up

Figure 45: Attitudes towards personal accounts, by typology, November 2006

Positive in Principle (25%)

Conditionally Keen (23%)

Undecided (28%)

Cynical (24%)

The Undecided are least likely to be saving in a pension

Figure 46: Pension saving profile, by typology, November 2006

ABC1s are most likely to be Positive in Principle

Figure 47: Personal account typologies, by gender, age, socio-economic group, marital status and lifestage, November 2006

Low-middle income groups have a strong tendency to be Conditionally Keen

Figure 48: Personal account typologies, by working status, household income, tenure, region and ACORN category, November 2006

Abstract

Modernising the welfare state, notably the pensions environment, is a primary aim of the UK government. Policymakers and legislators well appreciate the need to encourage more people to make provision for their own retirement. While this objective represents a major opportunity for the pensions industry, it is highly problematic - especially given that consumer confidence and interest in pensions is at all time low.

This report looks at the reasons why more than half of the UK’s working population is not saving in a pension, and seeks to identify the factors which would encourage them to start saving. It assesses the level of consumer support for personal accounts and the process of auto-enrolment. Drawing on a range of primary and secondary data sources, the report also provides a thorough appraisal of the current state of the UKpensions market, and assesses its short-term prospects for growth.

Get Full Details About This Report >>

About MarketResearch.com
MarketResearch.com is an online aggregator selling over 160,000 market research reports, company profiles and country profiles from over 600 research firms. Our reports will provide you with the critical business and competitive intelligence you need for strategic planning and marketing research. Coverage includes the US, UK, Europe, Asia and global markets.