Self Invested Personal Pensions - SIPPs - UK : Market Research Report

Self Invested Personal Pensions - SIPPs - UK

Published by: Mintel International Group Ltd.

Published: Dec. 1, 2008

Issues in the Market: Key issues; Market background and definitions; The pensions landscape; Occupational schemes; Individual pensions; Group pensions; Benefit structures; Other definitions; Abbreviations; Advertising data
Market in Brief: Transfers and portfolio rationalisation drive the market; Market dominated by a handful of firms; Channels to market and advertising; The consumer - high-end products, with high-end customers; The consumer - IFAs still the key route to market
Internal Market Environment: Key points; The pensions environment; Pension provision on the decline as firms look to reduce liability; Within the occupational sector, a migration towards DC occupational pension schemes; The past provides a positive environment for SIPPs; Personal Accounts may provide further impetus for the SIPP sector; A variety of possible effects; Legislative issues; A-day changes aimed to encourage greater pension participation; New opportunities from legislation; Regulatory considerations; SIPP providers now fully regulated; Retail Distribution Review; Review of the suitability of SIPP and personal pensions advice; Protected rights funds made eligible for full SIPP investment; Consumer financial activity; Savings and debt repayment top the agenda; Affluent and wealthy to increase activity levels; Prospects improve for life and pension providers
Broader Market Environment: Key points; Target market begins to expand; More time being spent in retirement; Changing circumstances already demand greater focus on saving for retirement; Inflation and recession put pressure on long-term investment returns; More people likely to be working beyond retirement age; Property wealth will increasingly be considered as a source of income in retirement
Competitive Context: Key points; SIPPs fighting competition on two fronts; The potential SIPP market is relatively clearly defined; The pre-retirement segment; Non-pensions retirement-planning products; Buy-to-let; Faith in property as a pension has plummeted this year; Collective investments; ISAs; The in-retirement segment
Strengths and Weaknesses in the Market
Market Size and Forecast: Key points; Rapid growth in the market; Strong market growth driven by a combination of positive factors; A golden age; but will it last?; Organic growth likely to be more important in future; Estimated £50 billion under management; Storm clouds are building; Market fragmentation is also a negative factor; e-SIPP attracting a new younger audience; Protected rights - a new impetus for the market; Forecast; Factors used in the forecast
Market Share: Key points; Determining market share is a challenge; The insured SIPP sector is highly concentrated; Fully invested SIPP market is increasingly competitive
Companies and Products: Key points; James Hay; Standard Life; Aegon Scottish Equitable; AJ Bell; Suffolk Life; Hornbuckle Mitchell; Hargreaves Lansdown; AXA; Other SIPP providers
Brand Communication and Promotion: Key points; Pensions advertising spend is negligible; Marketing processes for SIPPs generally do not justify main media expenditure; But there are exceptions; Majority of advertising through the press
Channels to Market: Key points; Most pensions sold with advice; Formal advice focused on IFAs; Banks still fringe players in the SIPP sector; Pensions advice dominated by generalist IFAs
The Consumer - Advice and the SIPPs Market: Key points; Attitudes towards SIPPs; Apathy about pensions is still the dominant attitude; Lifestage and household income are key determinants of attitudes towards SIPPs; A new market being opened up?; Nurturing the next generation; SIPPs face strong competition from non-pension saving; Implications; Consolidating holdings in retirement; Consolidation, not accumulation?; Implications; Pensions matters generally involve a range of advice sources; Use of formal sources of advice increases with age and socio-economic status; Third age and married consumers most likely to consult widely on pensions; Peaks in seeking advice relate to more affluent consumers and those in the family group; Wealthy Achievers and consumers in South consult on pensions; Web likely to prove a crucial medium for SIPPs; Implications

Abstract

The market for self-invested personal pensions (SIPPs) has, on paper, been a real boom area over the last three years. Exponential growth from a very low base had created a market with £50 billion in assets under management prior to the Q3 2008 stockmarket shake-out. Growth has been driven by pension simplification, the demise of occupational pension provision and the recognition among more sophisticated financial services consumers of the need for increased self-provision. Other major drivers have been advances in technology allowing lower-cost and even self-service administration of pension funds, alongside consumer demands for flexibility and ‘individualisation’ of their pensions.

Closer examination, however, suggests reasons why all is not quite as positive as it seems. Blurring of definitions with other personal pensions is part of the explanation. Another factor is ‘fashion’ - SIPPs are flavour of the month. By far the most important driver, however, has been the ‘recycling’ of existing pension fund money and consolidation of separate pots of money into a single wrapper; and the wrapper of choice has often been a SIPP. New pension money has been in relatively short supply in this part of the pension jungle as it has elsewhere.

This report examines how and why the SIPP market has developed so powerfully over the last three to four years and offers a critical and realistic assessment of future potential in the context of the retirement market as a whole.

Key issues:

SIPPs have been a major beneficiary of the simplification and rationalisation of the pensions landscape over the last three years.
The increasing focus on the need for self-provision in the retirement market has been a major driver.
Since A-day, for workers with sufficient accumulated funds, SIPPs have proved to be a popular vehicle for consolidation; as a result, much of the apparent growth in the market has been illusory.
The flexibility of SIPPs and the fact that they can be used well into retirement as a vehicle for drawing down income instead of purchasing a retirement annuity have enhanced their attractiveness; technology has allowed the development of lower-cost SIPP variants and significant self-service functionality.
Very active product development of this type, however, has on the one hand been a stimulus for the market but on the other has led to concerns about mis-selling, product suitability, understanding of risk and product understanding.
Nevertheless, there is genuine huge growth potential and it is easy to see a scenario in which SIPP eclipses all other types of DC provision (including occupational, if group SIPP develops as some commentators predict) creating some profound challenges for the insurance and fund management industries long into the future.

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Self Invested Personal Pensions - SIPPs - UK

Table of Contents

Abstract