UK Individual and Group Pensions 2009

Published by: Datamonitor

Published: Jul. 31, 2009 - 943 Pages

Table of Contents

Overview

Catalyst

Summary

EXECUTIVE SUMMARY

Table of figures

Table of tables

THE FUTURE OF THE UK PENSIONS MARKET

Introduction

Personal pensions and SIPPs continue to dominate the pensions market

The rise and rise of SIPPs have been subdued by the state of the economy

The regular premium market saw slight growth amid economic turmoil

The group personal pensions market has seen healthy growth over the past five years

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

Distributing SIPPs on an efficient wrap platform will give investors increased tax-efficiency and convenience

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

Greater clarity of SIPPs is needed to prevent a mis-selling scandal

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

Group personal pensions may play a key role in pensions beyond the introduction of Personal Accounts in 2012

Group SIPPs are expected to flourish, but their emergence should be treated 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

Most people are not well equipped to deal with the costs and risks involved in private pension provision

People must be able to separate the concepts of building up a pension fund and receiving pension income

Individuals are increasingly on their own in planning for retirement and need to understand the risks that they will shoulder

The universally accepted belief that over the long term equities deliver good private pensions may be in question

Demographic trends are making pension savings a necessity

People need to save for their retirement, but they are hindered by the perception of affordability

People are not prepared to take on higher pension savings during a market downturn

People need to be educated about striking the right balance between short- and long-term savings

Affordability and short-term views act as compound barriers to pension savings

People are not saving for the future, assuming they will be looked after by the buckling state system

Government reforms will not do enough to help individuals save for retirement

Individuals face bigger burdens on private savings to produce good pensions

The government hopes that Personal Accounts will address the problems of long-term retirement savings

Personal Accounts are unlikely to hit the target

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

Public-sector pension reform is a slow and controversial process and may not boost pension savings

Leveling down employers' contribution through the Personal Accounts scheme will make pension provision worse

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

The government and industry must put more personal responsibility on consumers regarding retirement planning

The effectiveness of Personal Accounts is uncertain, and the market is becoming increasingly polarized between stakeholder and SIPP pensions

The pensions market faces regulatory changes from the Retail Distribution Review

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

Providers should take note of the need for a money guidance service for greater consumer access to retirement planning tools

The FSA alleges that many consumers may have been given the wrong pensions advice

THE FUTURE OF PRODUCT INNOVATION IN PENSIONS

Prudential and Standard Life head the competition in the pensions market

Prudential sits at the top spot in the single premium pensions market

Much of Prudential's strength comes from its launch of PruFund and PruSelect in late 2008

Prudential regularly reviews its business processes throughout market turmoil and has come out with positive perceptions from IFAs

Prudential has maintained IFAs' confidence in its financial stability

Standard Life dominates the regular premium pensions market in 2008

Standard Life offers customer-relevant solutions to address tough market conditions

Standard Life has created strong customer-focused brand platforms that engage its audience through the 'Active Money' SIPP

Innovative strategies from providers must address people's barriers to save

Affordability is a great concern amongst non-savers

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

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

Providers and advisors should encourage people to exercise personal responsibility

Those who do not have a route into a pension scheme can always look into alternatives to pension saving

Individual Savings Accounts

Venture Capital Trusts

Property

Providers should target those approaching retirement who want to secure their retirement ambitions

Accumulators are aged between 50 and 59, but have lifestage complexity

Accumulators want their individual needs recognized with a personal service and are attracted to convenience

Providers should reward accumulators to incentivize this segment to save

Providers should also target those with aspirations of accumulating wealth

The pensions industry is missing the opportunity to harness the aspirer market

Connecting to the world and having a sense of belonging appeals to aspirers

Aspirers are increasingly seeking a purchase experience that is efficient and convenient

Providers should establish early relationships with aspirers to gain business when they accumulate wealth

THE FUTURE OF PENSIONS DISTRIBUTION

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

IFAs perceive that pensions will prove to be less difficult to sell than other products

IFAs will play a crucial role in the new pensions era

Regulatory changes to distribution represent a particular challenge to the sale of SIPPs

Online distribution remains a promising area in the individual pensions market

Wrap platforms may soon reach a proliferation peak

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 (GPPs)

DSS rebates

Employer-sponsored stakeholder pension

Self-invested personal pensions (SIPPs)

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: Forecasts single premium pensions new business, £m annual premium equivalent (APE), 2009-13

Table 2: Forecast regular premium pensions new business, £m APE, 2009-13

Table 3: Single premium pensions new business for the top 10 pensions companies 2008, £m APE

Table 4: Regular premium pensions new business for the top 10 pensions companies 2008, £m APE

Table 5: Total single and regular premium pensions new business by distribution channel, £m APE, 2004-08

Table 6: How do you see business in each of the following areas changing over the next six months?

Table 7: Forecast single and regular premium pensions new business by distribution channel, £m APE, 2009-13

Table 8: Single premium pensions new business premiums £m APE, 2004-08

Table 9: Regular premium pensions new business premiums, £m APE, 2004-08

Table 10: How do you rank the following companies in terms of their overall service?

List of Figures

Figure 1: Personal pensions and SIPPs still dominate single premium pension sales in 2008

Figure 2: The regular premium pensions market saw slender growth in 2008

Figure 3: SIPP products will rise in popularity over the next five years

Figure 4: Group personal pensions are forecasted to dominate the regular premium pensions market

Figure 5: Pressure on the working age population is increasing as more people begin to retire

Figure 6: Longer life expectancies are producing growth in the number of older people in the UK

Figure 7: Affordability is a strong barrier against saving for a pension

Figure 8: Prudential dominates the single premium pensions field, with the highest market share by percentage in 2008

Figure 9: The majority of advisors view Prudential as a financially stable life company

Figure 10: Standard Life heads the group of leading regular premium pension providers, with the highest market share by percentage in 2008

Figure 11: Standard Life effectively employs use of celebrity to promote its 'Active Money' SIPP

Figure 12: The accumulators are a significant part of the population in the UK

Figure 13: Lincoln Financial Group offers a gentle reminder to consumers of the future challenges they may face in their lifetime

Figure 14: IFAs dominate the distribution of pension products

Figure 15: Advisors believe pension business will see an increase over the next six months

Figure 16: IFAs will continue to be the predominant distribution channel in the pensions market

Abstract

• Examines the current shape of the individual pensions market and explores factors that are currently limiting the sale of pensions products
• Comprehensive analysis of key products and regulatory trends affecting the pensions market in 2009
• 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
• Access Datamonitor's forecasts for the future market size of the UK Pensions market
• Identify competitor innovations and dynamics, and changes taking place in the distribution dynamics of the market

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