UK Individual Pensions 2008

Published by: Datamonitor

Published: Jan. 8, 2009 - 7 Pages

Table of Contents

Overview

Catalyst

Summary

Executive Summary

Table of Contents

Table of figures

Table of tables

SPECIAL FEATURE: GETTING TO GRIPS WITH PENSION SAVINGS

The UK government is failing to boost pension savings leaving providers to fill in the gap

Providers can seize opportunities where the government has failed

The government hopes that personal accounts will address the problem of long-term retirement savings

The public sector pension reform is a slow and controversial process and may not boost pension savings

Government focus will renew interest in pension savings helping providers as well

There are doubts as to whether personal accounts will hit the target

The government is continually showing a lack of continuity on pension policy, undermining its importance

Leveling down employers' contribution will make pension provision worse

The government should still ensure that it pays to save against the impact of means-testing

Employers may be tempted to minimize costs of personal accounts through lower employee salaries

However, a contributions ceiling has been set to prevent the weakening of existing pensions provision

The effectiveness of personal accounts is uncertain and the market continues to polarize between stakeholder and SIPP pensions

Providers can win new business in the middle market with SIPPs

Offering low-cost SIPPs presents an opportunity

Low-cost and vanilla SIPPs will meet the needs of the 'recessionary consumer'

New SIPP powers to hold protected rights will increase flexibility and investment choice for consumers

However, a SIPP mis-selling scandal may come to pass if greater clarity is not introduced to the market

Recent economic troubles may prove disastrous for SIPPs

Providers can capitalize further from SIPPs by distributing them on an efficient wrap platform

The increasing interest in SIPPs does not necessarily signal an end for personal and stakeholder pensions

Providers should focus on a more relevant retirement planning system by addressing market conditions and demographics

A more flexible retirement planning program is needed to make the pensions industry more viable and sustainable

Current property and equities market presents huge buying opportunities for starting a pension

Variable annuities are increasingly becoming part of a retirement and investment plan

Combining variable annuities with a SIPP will give investors an ideal balance for their retirement strategy

There are currently alternatives to pension saving, the choice of which is dependent on investor attitude and preferences

Individual savings accounts

Venture capital trusts

Provider strategies for product diversification and redesign need to be examined to address the barriers to save

Affordability is an obstacle amongst most non-savers

Targeted marketing, rather than new product development, must be the focus

Providers and advisors should support people to exercise personal responsibility

People should be encouraged with a long-term view of pension savings

Providers should take note of the need for a 'Money Guidance' service for greater consumer access to retirement planning tools

Providers must communicate with advisors more readily

MARKET CONTEXT

The dominance of personal pensions has been overshadowed by the rise of SIPPs

Despite the dominance of personal pensions, SIPPs have experienced the most impressive year-on-year growth over the last five years

SIPPs continue to be the most popular product in the regular premium pension market

Investor desire for self-control has been a driver for choice of product

A clear definition of SIPPs is necessary to ensure that distributors do not sell an incorrectly defined product

Group SIPPs are expected to flourish but their emergence should be approached with caution

The group SIPP market offers members a flexible and engaging product, with a range of investment options tailored to suit the different needs of members

There remain differences of opinion in the industry about the group SIPP product

Industry views of a group SIPP proposition depend on the provider's existing market

IFAs are the dominant distribution channel for pension products

IFAs are well-established in the pensions market but many are shifting their focus up market

SIPPs require a clear and transparent charging structure to engage with changing regulatory requirements

Online distribution remains a promising area in the individual pensions market

Wrap platforms may soon reach a proliferation peak

The RDR is the main piece of distribution regulation in the market

The RDR will increase the quality of advice and promote transparency of charges in retirement planning

The RDR initiative aims to address current market failures

The latest proposal outlines a clear distinction between 'sales' and 'advice'

Customer agreed remuneration will allow competitive forces to work in favor of consumers

AEGON heads the competition in the single and regular premium pensions market

AEGON dominates the pensions market in both the single and regular premium pensions in 2007

The company has secured distribution deals to increase market share

AEGON has combined its individual and corporate pensions businesses

AEGON has achieved numerous awards in 2008

Many competitors have focused their energy on their SIPP offerings

Prudential has brought a new flexible SIPP to the market in partnership with Cofunds

Standard Life allows SIPPs to access its FundZone fund supermarket

Standard Life has also committed resources towards helping advisors with SIPPs

An increasing number of non-insured SIPPs from non-life companies are in force in the market

Hargreaves Lansdown has become a leading non-life SIPP provider with its Vantage SIPP

A J Bell has put significant attention towards SIPPs and offers three plans to investors

Market forecasts

SIPP products will shape the pensions market at the expense of stakeholder and personal pensions

Group personal pensions are forecasted to dominate the regular premium pensions market

APPENDIX

Data

Definitions

Single premium policy

Regular premium

New business

Life based savings products

In-specie contribution

Pension product definitions

Personal pensions

Stakeholder pensions

Group personal pensions

DSS rebates

Employer sponsored stakeholder pension (ESS)

SIPPs (self invested personal pensions)

ABI definitions of distribution channels

Independent financial advisors (IFAs)

Direct sales forces

Tied agents

Multi-tied agents

Bancassurance

Direct marketing

Other

Further reading

Ask the analyst

Datamonitor consulting

Disclaimer

List of Tables

Table 1: Single premium pensions new business, £m APE, 2003-07

Table 2: Regular premiums pensions new business, £m APE, 2003-07

Table 3: Forecast single premium pensions new business, £m APE, 2008-12

Table 4: Forecast regular premium pensions new business, £m APE, 2008-12

Table 5: Total single and regular premium pensions new business by distribution, £m APE, 2003-07

Table 6: Single premium pensions new business for the top ten life companies, £m APE, 2003-07

Table 7: Regular premium pensions new business for the top ten life companies, £m APE, 2003-07

List of Figures

Figure 1: Advisors desire more communication with providers

Figure 2: Personal pensions and SIPPs dominate single premium pension sales in 2007

Figure 3: SIPPs have experienced a CAGR of 203% in the regular premium pensions market

Figure 4: IFAs dominate the distribution of pension products

Figure 5: The market for single premium pensions is dominated by AEGON

Figure 6: AEGON heads the group of leading regular premium pension providers in 2007

Figure 7: The SIPPs market will see a slight increase in non-insured SIPPs business over the next five years

Figure 8: The single premium pensions market is forecast to remain static over the next 5 years

Figure 9: Regular pensions sales will rise by a CAGR of 6% between 2008 and 2012

Abstract

• Examines the current shape of the individual pensions market and explore factors that are currently limiting the sale of individual pensions products.
• Comprehensive analyses of key products and regulatory trends affecting the individual pensions market in 2008.
• Assesses the strategies to combat key barriers to save for pension provision with particular focus on market conditions and demographics.

• Provides detailed analysis of developments in the individual pensions market such as personal accounts.
• Identify competitor innovations and dynamics, and changes taking place in the distribution dynamics of the market.
• Understand the future implications to the market, and the key product opportunities that exist over the next 5 years.

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