Table of Contents
Introduction and Abbreviations
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- Report contents
- Methodology
- Global information and research
- Consumer research
- ACORN
- Abbreviations
Premier Insight
Executive Summary
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- Life-expectancy is on the increase
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- Figure 1: Life-expectancy, by selected ages, 1981-2001
- Gilt rates are lowest for many years
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- Figure 2: Consolidated stock average annual gilt yield, 1900-2003
- The number of occupational pension scheme members has grown rapidly over the last decade
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- Figure 3: Number of consumers with pension provision, 1993-2003
- DSF and tied agent sales fall to 7.6% in 2003
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- Figure 4: Distribution of pension annuity sales, by value, 1998-2003
- BRS withdraws from the market
- New rules will allow dealing in all types of investments
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- Figure 5: Alternative retirement strategies, June 2004
Definitions
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- Definitions of the main annuity products
Market Factors
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- The savings ratio is projected to increase
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- Figure 6: PDI, expenditure and savings, at current prices, 1999-2009
- Property seems a better investment
- Base rates begin to climb
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- Figure 7: Bank of England base rate, January 1994-June 2004
- The stock market
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- Figure 8: FTSE 100 index, January 1996-January 2004
- The gilts market
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- Figure 9: Consolidated stock average annual gilt yield, 1900-2003
- Annuity rates will be kept low for the foreseeable future
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- Figure 10: Expectation of life at 65 years of age, by gender (UK), 1901-2021
- Research group concludes “life-expectancy for some in retirement will increase significantly”
- Mortality and the health of the nation
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- Figure 11: Expectation of life at birth, by selected ages, 1981-2001
- Open Market Option
- A-day 6 April 2006
- Implications of A-day
- The impact of new triviality rules
- Company Law: Flexibility and Accessibility
Market Size
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- Nearly 19 million people hold an occupational pension
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- Figure 12: Pension provision of UK adult population, 1993-2003
- Average premium per policy exceeds £10k in 2003
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- Figure 13: New individual pension business, by volume and value, 1998-2003
- Number of new retirees to rise
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- Figure 14: Number of new retirees, 2001-10
- Over 355,000 new policies sold in 2003
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- Figure 15: New pension annuities and income drawdown business, 1999-2003
- Sales of single premium policies decline
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- Figure 16: Single premium individual life annuities, 1994-2003
- The value of pension annuity payments reached £3.2 billion in 2002
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- Figure 17: Value of annuity payments, 1993-2002
- Is BTL a practical alternative to an annuity?
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- Figure 18: Buy-to-let lending, 1999-2003
- BTL v annuities
- Equity release grows in appeal
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- Figure 19: Total sales equity release products , 2002-03
- New premiums for long-term care reached £73 million in 2002
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- Figure 20: Single premium point-of-need long-term care policies, 1995-2002
Key Players and Product Pricing
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- The leading annuity providers
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- Figure 21: Selected annuity providers, 2004
- Standard rates are lowering to compensate enhanced and impaired lives
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- Figure 22: Level single life annuity rates, June 2004
- A fifth of married annuitants have a joint annuity policy
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- Figure 23: Level joint life annuity rates, June 2004
- Inflationary effects will become a bigger issue for providers and consumers
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- Figure 24: RPI single life annuity rates, June 2004
- The level of annuity rates going forward
Distribution
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- IFAs could play a major role in advising annuitants about OMO
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- Figure 25: Distribution of individual pension premiums, 2003
- IFAs accounted for more than 83% of total sales in 2003
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- Figure 26: Distribution of pension annuity sales, by value, 1998-2003
- Removing those with low life expectancies would push the average life-expectancy up and the conventional annuity rate down
- There were around 15,000 new drawdown contracts last year
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- Figure 27: Distribution of income drawdown sales, 1998-2003
- Internet distribution presents risks
Consumer Financial Activity
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- Consumers are confident about financial activity going forward
- Demand on the main financial services providers (MFSPs)
- Borrowing, saving and debt repayment activity
- Savings and investment activity has remained relatively steady
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- Figure 28: Savings, investment, borrowing and debt repayment – consumers’ expected activity, September 2002-December 2003
- ABs, 23-29s and those earning over £35,000 are likely to be the most financially active
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- Figure 29: Expected financial activity, by gender, age socio-economic group, household income and working status, March 2004 and average for the last eight quarters
- Consumers looking to service debt
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- Figure 30: Leading financial activities planned in the next 6 months, December 2002-March 2004
- HSBC and NatWest were strong in the latest quarter
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- Figure 31: Leading main financial services providers: market share, March 2003-March 2004
- Bank of Scotland can expect active customers in investments sector
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- Figure 32: Saving, investment and lending, market sizes by expected customer demand and brand leaders, March 2004
- RBS and BoS customers will be the most active
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- Figure 33: Activity levels of main financial providers’ customer bases, March 2004
The Consumer
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- Nearly a fifth of consumers contribute to an employer pension
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- Figure 34: UK pension contributions, June 2004
- Are pensions too expensive for young adults?
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- Figure 35: UK pension contributions, by gender and age, June 2004
- ABs most likely to contribute to a pension scheme
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- Figure 36: UK pension contributions, by socio-economic group and marital status, June 2004
- Low income households least likely to hold a pension
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- Figure 37: UK pension contributions, by gross annual household income, June 2004
- Pension holders expect annuity providers to be online
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- Figure 38: UK pension contributions, by new technology users and newspaper readership, June 2004
- Providers consider retailers to offer in-store advice
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- Figure 39: UK pension contributions, by supermarket usage, June 2004
- Those aged 45-54 more likely to choose a traditional annuity
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- Figure 40: Pension fund conversion preference, by gender and age, June 2004
- ABs are more likely to favour index-linked products
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- Figure 41: Pension fund conversion preference, by socio-economic group and marital status, June 2004
- Providers who offer the clearest explanation of annuities will win business
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- Figure 42: Pension fund conversion preference, by lifestage and new technology users, June 2004
- Heavy TV viewers are likely to favour guaranteed annual payments
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- Figure 43: Pension fund conversion preference, by newspaper readership and commercial TV viewing, June 2004
- Morrisons shoppers likely to favour a lump sum and guaranteed annual payment
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- Figure 44: Pension fund conversion preference, by supermarket usage, June 2004
Consumer Attitudes and Targeting Opportunities
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- Retired people have not been encouraged to be self-sufficient
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- Figure 45: Current income stream, by gender and age, June 2004
- ABs have the funds to invest in speculative products
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- Figure 46: Current income stream, by socio-economic group and marital status, June 2004
- Consumers still buying a home favour a steady income
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- Figure 47: Income stream, by gross annual household income and tenure, June 2004
- Providers could offer retirement management services
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- Figure 48: Current income stream, by new technology users, newspaper readership and commercial TV viewing, June 2004
- Just 1% of respondents said that they receive drawdown income
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- Figure 49: Current income stream, by supermarket usage, June 2004
- A quarter of the sample said that they were happy with their income
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- Figure 50: Alternative retirement strategies, by gender and age, June 2004
- A relatively small percentage will utilise equity release
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- Figure 51: Alternative retirement strategies, by socio-economic group and lifestage, June 2004
- Only 4% are worried about falling annuity rates
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- Figure 52: Alternative retirement strategies, by working status and gross annual household income, June 2004
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- Figure 53: Alternative retirement strategies, by pension contributions, June 2004
- Personal pension holders fairly likely to own a cash ISA
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- Figure 54: Pension contributions, by selected investment product ownership, June 2004
- Full-time workers most likely to hold a pension
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- Figure 55: Personal pension and annuity holders, by gender, socio-economic group, marital status, working status and gross annual household income, June 2004
- Annuitants less likely to view their home as a retirement savings fund
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- Figure 56: Attitude of personal pension holders and annuitants, June 2004
- Personal pension holders prefer traditional products
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- Figure 57: Personal pension holders and annuitants, by conversion preference, June 2004
- Most seek investment advice from a bank or building society
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- Figure 58: Personal pension holders and annuitants, by influence on investment, June 2004
- Personal pension holders more regretful
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- Figure 59: Personal pension holders and annuitants, by regret, June 2004
- The level of understanding will be higher for future annuitants
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- Figure 60: Personal pension holders and annuitants, by level of financial knowledge, June 2004
Industry Views
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- Market size
- OMO
- Annuity rates
- Internet distribution
- General issues
The Future
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- Exploiting the open market option
- Will A-day open up the market?
- Compulsory annuities will be scrapped under a Conservative government
- Interest rates
- Consumers wake up to work in retirement
Forecast
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- Figure 61: Forecast of new pension annuities business, 2003-09
- Figure 62: Forecast of the average premium per policy, 2003-09
- Factors incorporated
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