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Published by: Mintel International Group Ltd.
Published: Aug. 1, 2007 - 107 Pages
Table of Contents
- Issues in the Market
- Key issues
- Market overview
- Figure 1: An overview of the annuity and retirement income market
- Definitions
- Definitions - developing products
- Abbreviations
- Market in Brief
- Annuities sales reach £9.6 billion in 2006
- Figure 2: New pensions annuities business, 2000-06
- Income drawdown sales soar in 2006
- Figure 3: New income drawdown policies, 2000-06
- Little improvement in uptake of OMO
- Figure 4: Percentage of external and internal annuities sales, 2000-06
- Prudential has over 23% of market share
- Figure 5: Market share of new pension annuity business, 2006
- Annuity market increases level of innovation
- More than a quarter of sales made directly with providers
- Figure 6: Distribution of pension annuities, by proportion of value, 2002-06
- £900,000 spent advertising annuities in last 12 months
- Consumer research shows growth of non-traditional forms of income
- Figure 7: Sources of retirement income, June 2007
- Non-retirees appear more positive about annuities
- Figure 8: Attitudes towards annuities, by working status, June 2007
- Broader Market Environment
- Key points
- Life-expectancy rises….
- Figure 9: Life-expectancy projections for people aged 65, by gender, 1987-2052
- …causing annuity rates to fall
- By 2009 one in five people will be of retirement age
- Figure 10: Number of people of retirement age in the UK and as proportion of total population, 1991-2012
- A shift in priorities
- Ageing population not necessarily reflected in retiree numbers
- Changing work patterns will have longer term implications
- Figure 11: Estimated number of retirees, 2001-12
- State pension accounts for largest proportion of retirement income
- Figure 12: Average gross weekly incomes of pensioner units, by age, 2005/06
- Growth in DC schemes and personal pensions will boost annuities
- Inflationary pressures hit pensioner income
- Figure 13: The Bank of England’s base rate, November 1990-July 2007
- Higher inflation for retirees
- Performance of FTSE helps increase value of pension funds
- Figure 14: FTSE 100 and FTSE All Share - daily movements May 1997-June 2007
- Shortage of government bonds leads to reduced yields
- Figure 15: 2.5% consolidated stock average annual gilt yield, 1970-2006
- Annuity providers forced to diversify assets
- NPSS could provide additional boost for annuities market
- The impact of FSA regulation
- Internal Market Environment
- Key points
- Figure 16: Advantages and disadvantages of annuities, 2007
- Annuities remain a controversial product
- Falling annuity rates increase negative perception…
- Figure 17: Annual annuity income, gilt rate and bank base rate, January 1990-March 2007
- …however, rates increase slightly in 2007
- One year on - the impact of A-day
- Government U-turn makes ASP less attractive
- A-day brings greater flexibility to annuities…
- …but uptake of the OMO remains low
- Efforts made to promote the OMO
- For data regarding the uptake of the OMO see Market Size section.
- Complaints over advice on income drawdown products
- Competitive Context
- Key points
- Growth in housing wealth changes attitudes towards property
- Figure 18: Average house prices in the UK, 1970-2006
- More people consider property as a pension
- Figure 19: Number and value of buy-to-let sales, 1999-2006
- Equity release expected to grow in popularity
- Figure 20: Number of plans in force at year end, by SHIP members, 2003-06
- People turn to ISAs to build up a retirement fund
- Figure 21: New mini and maxi ISAs opened, 2000/01-2006/07
- Consumer awareness and apathy create barrier to saving in pension
- Strengths and Weaknesses in the Market
- Figure 22: Strengths and weaknesses in the UK annuity and retirment income market
- Strengths of the annuities and retirement income market
- Weaknesses of the annuities and retirement income market
- Pension Overview
- Key points
- Active membership of occupational pension schemes declining
- Figure 23: Number of private sector occupational scheme members, 1995-2006
- Active membership of DB schemes has fallen by 200,000 since 2004
- Figure 24: Active employee membership of private sector occupational pension schemes, by benefit type, 2004-06
- A-day provides boost to new business levels of personal pensions
- Figure 25: Individual pension sales, 2001-06
- Average size of pension pot falls in 2006
- Figure 26: Average size of private pension fund used to purchase an annuity, 2002-07
- Market Size and Forecast
- Key points
- A-day provides boost for annuity sales
- Figure 27: New pensions annuities business, 2000-06
- Annuitised pension funds show growth across the market…
- Figure 28: Number of pension annuities sold, by size of fund, 2001-06
- …although mid-sized funds show fastest growth
- Income drawdown sales soar in 2006
- Figure 29: New income drawdown policies, 2000-06
- Only a third of consumers exercise the OMO
- Figure 30: Percentage of external and internal annuities sales, 2000-06
- Income drawdown market dominated by external sales
- Figure 31: Percentage of external and internal income drawdown sales, 2000-06
- Market for purchased life annuities has almost disappeared
- Figure 32: New business in purchased life annuities, 2001-06
- Value of annuity payments continues to rise
- Figure 33: Annuity payments per annum, 1995-2005
- Forecast
- The A-day aftermath
- Figure 34: New Pensions annuities business 2000-12
- Figure 35: New Income Drawdown policies 2000-12
- Assumptions for forecast
- Market Segmentation
- Key points
- Investment annuities account for less than 3% of the annuity market
- Figure 36: Number of pension annuities, by type, 2006
- Enhanced annuity market continues to grow
- Figure 37: Number of enhanced/impaired life annuities and as percentage of annuties sold, 2003-06
- Variable annuities may have a bright future
- Market Share
- Key points
- Prudential accounts for 23% of the market
- Figure 38: Market share of new pension annuity business, 2006
- Top six providers account for almost 65% of market
- Figure 39: The top 15 companies in pensions annuity market, by new business premiums, 2006
- Individual pension providers jostle for position
- Figure 40: Individual pension business rankings, based on total net premiiums written, 2005
- Companies and Products
- Growth in retirement planning sector
- Conventional annuities - major annuity providers lead market
- Investment annuities - a bright future?
- Enhanced/impaired annuities dominated by specialist firms
- Number of specialist IFA firms grows
- Company profiles
- Prudential
- Norwich Union Life
- Legal & General
- Aegon Scottish Equitable
- Brand Communication and Promotion
- Key points
- Annuity products have lowest adspend of all current financial products
- Adspend on annuities increased by £400,000 in 2006/07
- Figure 41: Expenditure by advertisers in the annuity market, 2002/03-2006-07
- Press advertising accounts for over 80% of adspend
- Figure 42: Advertising expeniture on annuities, by media type, 2006/07
- Channels to Market
- Key points
- Key sales channels
- Direct sales now accounts for a quarter of all annuity business
- Figure 43: Distribution of pension annuities, by proportion of value, 2002-06
- Income drawdown still dominated by need for independent advice
- Figure 44: Distribution of income drawdown products, by proportion of value, 2002-06
- Bancassurance increases share of sales in 2006
- Will the growth in ‘silver surfers’ impact the distribution of annuities?
- The Consumer and Product Ownership
- Key points
- 14% of adults hold a personal pension
- Figure 45: UK pension ownership, June 2007
- Implications and opportunities
- ABs aged 45-54 are the most likely to have a personal pension
- Figure 46: Pension ownership, by gender, age, socio-economic group and marital status, June 2007
- Implications and opportunities
- A quarter of people in the family lifestage have no pension provision
- Figure 47: Pension ownership, by lifestage, working status, gross annual household income and housing tenure, June 2007
- Implications and opportunities
- Four in ten broadsheet readers have company pension
- Figure 48: Pension ownership, by region, technology usage, Internet usage and newspaper readership, June 2007
- Implications and opportunities
- Retired people show greater propensity to own ISAs and Premium Bonds
- Figure 49: Ownership of financial products, by gender, age, socio-economic group, marital status, lifestage and working status, June 2007
- Implications and opportunities
- Savings product ownership directly linked to pension provision
- Figure 50: Financial product ownership, by type of pension held, June 2007
- Implications and opportunities
- CHAID analysis
- Figure 51: Key targets for pension providers, June 2007
- The Consumer - Sources of Retirement Income
- Key points
- Only 8% of retired people are receiving an income from an annuity
- Figure 52: Sources of retirement income, by working status, June 2007
- Implications and opportunities
- Blurring boundaries between work and retirement
- Less than half of all retired adults have an income from a private pension
- Figure 53: Sources of retirement income among retirees, by age, socio-economic group, marital status, household tenure, technology usage and newspaper readership, June 2007
- Implications and opportunities
- The impact of affluence
- Implications and opportunities
- Banking on bricks and mortar
- Figure 54: Sources of retirement income for non-retired people, by age, socio-economic group and marital status, June 2007
- Implications and opportunities
- Internet usage influences approach to retirement planning
- Figure 55: Sources of retirement income for non-retired people, by household tenure, technology usage and newspaper readership, June 2007
- Implications and opportunities
- More than a third expect to receive retirement income from one source
- Figure 56: Repertoire of number of sources from where people hope to receive income during retirement, June 2007
- Implications and opportunities
- Annuitants have several sources of income
- Figure 57: Expected income sources in retirement, by number of potential sources, June 2007
- More affluent consumers have more sources of income
- Figure 58: Repertoire of retirement income solutions, by gender, age, socio-economic group and lifestage, June 2007
- Implications and opportunities
- Broadsheet newspaper readers have more sources of retirement income
- Figure 59: Repertoire of retirement income solutions, by housing tenure, working status, media usage and newspaper readership, June 2007
- Implications and opportunities
AbstractThis report examines the key issues facing the market today, ranging from demographic to legislative changes, and the potential impact of changes in the wider market for pensions. The overall size of the annuity market is assessed, while the report also identifies the key players and the innovative new products offered to retirees. Consumer research highlights attitudes towards retirement planning in general, and retirement income solutions in particular.
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