UK Life and Pensions Distribution Overview 2008

Published by: Datamonitor

Published: Feb. 18, 2009 - 13 Pages

Table of Contents

Overview

Catalyst

Summary

Table of Contents

Table of figures

Table of tables

Retail Distribution Review

The key elements of the RDR

Improved clarity of services was a key aim of the RDR

Remuneration will become less open to influence by providers

Standards of professionalism in the industry will be improved

The RDR development process continues

Responses to the RDR have been mixed

Key criticisms of the RDR are that it hasn't fulfilled the clarity it promised to deliver

Datamonitor view of the RDR reforms

Product Distribution through the IFA CHannel

The IFA channel accounts for nearly half of total life and pensions sales in the UK

The total regular premium life market has declined by a compound annual rate of 9%

Term assurance dominates regular premium life sales by IFAs

The market for endowments has collapsed

Savings-related term has withstood market pressures, despite mortgage-related sales being strongly impacted by the housing market

Total single premium life market has grown by an annual compound rate of 24.1%

Unit-linked bonds dominate the single premium life market for IFAs, although there has been strong growth in guaranteed bonds

Guaranteed bonds have grown in popularity with IFAs, fuelled by withdrawals from equity investments

Personal pensions dominate the pensions market in terms of new business from IFAs

SIPPs continue to be the most popular pensions product among IFAs

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

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

Appropriate segmentation and targeting of SIPPs can help IFAs boost take-up and retention

The financial advisor channel is forecast to remain dominant going forward

Sales of savings-related term assurance by IFAs is forecasted to dominate the regular premium life market

Differing views exist as to the impact of the economic downturn on protection sales

Datamonitor forecasts unit-linked bonds to continue their lead in single premium life sales by IFAs, although guaranteed bonds will increase in popularity

Guaranteed bonds are positively impacted by their guarantee element and CGT changes

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

The market will increasingly be shaped by SIPP products at the expense of stakeholder and personal pensions

Product Distribution through Bancassurance

The bancassurance channel has failed to challenge the dominant IFAs

The current bancassurance single premium life market is dominated by unit-linked and guaranteed bonds

Unit-linked bond products complement the bancassurance model with their simplicity

Bancassurance is growing stronger in guaranteed bonds fuelled by withdrawals from equity investments

Regular life premiums for bancassurers have been adversely affected by the mortgage crisis

The collapse of the endowment market has taken its toll on regular premiums

Savings-related term has withstood market pressures, despite mortgage-related sales being impacted by the housing market

IP and CII premiums have also suffered although they account for a very small percentage of bancassurers' regular life business

Bancassurers have not been able to increase their pensions business over the last 5 years

Single premium income has been helped by the increasing popularity of SIPPs and bancassurers have taken their share

Stakeholder pensions dominate the bancassurers' single and regular premium pensions income

APPENDIX

Product definitions

Life-based savings products

Life assurance

Single premium life

With-profit bond

Unit-linked bond

Income and growth bonds

Guaranteed equity bonds

Distribution bonds

Purchased life annuities

Other bonds

Annual premium life

Endowment policy

Whole of life insurance

Term assurance

Income protection

Critical illness

Collective life

ISAs

Personal pensions

Stakeholder pensions

Group personal pensions (GPPs)

DSS rebates

Employer-sponsored stakeholder pension (ESS)

SIPPs (Self Invested Personal Pensions)

FSAVC (Free-Standing Additional Voluntary Contributions)

ABI definitions of distribution channels

Independent financial advisors (IFAs)

Direct sales forces

Tied agents

Multi-tied agents

Bancassurance

Direct marketing

Telesales

Other

Further reading

Ask the analyst

Datamonitor consulting

Disclaimer

List of Tables

Table 1: Total life and pensions new business by distribution channel, £m APE

Table 2: Total regular premium life new business premiums segmented by distribution channel, £m APE

Table 3: Regular premium life sales by IFAs, £m APE

Table 4: Total single premium life sales segmented by distribution channel, £m APE

Table 5: Single premium life sales through the IFA channel, £m APE

Table 6: Regular premium pension sales by IFAs, £m APE

Table 7: Single premium pension sales by IFAs, £m APE

Table 8: Forecast total life and pensions sales by distribution channel, 2008-2012, £m APE

Table 9: Forecast regular premium life market new business premiums, 2008-2012, £m APE

Table 10: Forecast single premium life market new business premiums, 2008-2012, £m APE

Table 11: Forecast regular premium pensions new business premiums through IFAs, 2008-2012, £m APE

Table 12: Forecast single premium pensions new business premiums, 2008-2012, £m APE

List of Figures

Figure 1: FSA diagram of new investment distribution framework

Figure 2: Financial advisors dominate the sale of life and pensions products

Figure 3: Protection and mortgage-related term dominate regular premium life sales through the IFA channel

Figure 4: Unit-linked bonds account for 59% of total single premium life sales through the IFA channel

Figure 5: Group personal pensions dominate sales by IFAs in the regular premium market

Figure 6: Personal pensions continued to dominate the single premium pensions market in 2007

Figure 7: The regular premium life market will see slender growth over the next five years

Figure 8: Unit-linked bonds will still command single premium life sales by IFAs over the next five years

Figure 9: Regular pensions sales through IFAs will rise by a compound rate of 6% between 2008 and 2012

Figure 10: The single premium pensions market through IFA sales will remain static between 2008 and 2012

Figure 11: Bancassurers' mix of life and pensions business has not gained momentum

Figure 12: Bancassurers have focused their sales efforts on unit-linked and guaranteed bonds

Figure 13: The mortgage crisis has taken its toll on regular premiums sold through bancassurers

Figure 14: Banks have not been able to increase their share of the pensions market between 2003-2007

Figure 15: SIPPs and stakeholder pensions are the two most important single premium pension income generators for bancassurers

Figure 16: Stakeholder pensions dominate the bancassurers' regular premium income in 2007

Abstract

• This reports highlights the key findings of the RDR, outlines the responses to the FSA's report and provides Datamonitor's view of the findings
• The report provides historic and forecast data on how products are distributed through IFA and bancassurance channels

• Obtain an overview of the findings of the RDR with an concise outline of the key criticism and suggestions for improvement
• Access historic and forecast data on the distribution of life and pensions products in the UK

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