Table of Contents
Introduction and Abbreviations
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- A time for preparation
- Report contents
- Global information and research
- Consumer research
- ACORN
- Abbreviations
Premier Insight
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- Launch new and improved standard pensions products
- ISA tax issue is a strong sales point
- Average single-premium contributions increase
- SHPs had a major impact on the personal pensions sector
- Young people trust pensions more
- Investment club
- Pensions review newsletter
Executive Summary
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- The number of pensioners is projected to rise dramatically
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- Figure 1: Population growth projections, by age group, 2003 and 2028
- Steady stockmarket growth encourages investment
- Alternative investment markets are upbeat
- BTL and ISA investments remain appealing to some consumers
- The overall value of the market continues to decrease
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- Figure 2: New standard personal pensions business, 1999-2004
- Key players
- IFAs continue to lead distribution
- Advertising
- Consumer insights
- Younger people offer providers the best prospects
Background and Definitions
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- Basic state pension/Pensions Credit
- State Second Pension (S2P)
- Moving back to S2P
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- Figure 3: Percentage of population covered by selected pension types, 1978 and 2003
- Occupational pensions
- The investment climate is changing…
- ...and consumers await the effects of A-day
- Government downsizes estimates of relief paid on pensions
- Personal pensions
- Standard personal pensions
- Stakeholder pensions
- Self-invested personal pensions (SIPPs)
- Group personal pension (GPP)
- Pensions Commission
- Pensions Act 2004
Market Drivers
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- Challenges facing the pensions industry
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- Figure 4: Challenges facing pensions providers, February 2005
- The growing influence of retail brands
- The psychology of pensions
- The savings ratio is projected to rise
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- Figure 5: PDI, consumer expenditure and savings ratio, at current prices, 1999-2009
- The growing appeal of the stock market
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- Figure 6: Value of the FTSE 100 and FTSE – All-Share indices, January 1996-December 2004
- Consumers are sensitive to changes in the base rate
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- Figure 7: Bank of England base rate, 1992-2004
- Government measures will slow growth in the number of pensioners
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- Figure 8: Number of state pensioners, by gender, 1981-2011
- The future is grey
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- Figure 9: Population growth estimates, by age group, 2003-28
- The role of pensions providers with an ageing population
- Global ageing
- Competition
- Equity release is not an option for all homeowners
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- Figure 10: Total sales (SHIP members only), at current and constant 1999 prices, 1999-2004
- Few people are wealthy enough to purchase a second property as a retirement solution
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- Figure 11: Buy-to-let mortgages outstanding and gross new advances, 1999-2004
- ISAs offer some people a more flexible investment option
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- Figure 12: Market value of funds held in shares ISAs and cash ISAs, 2000-04
- Employers are increasingly unable to offer long-term guarantees
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- Figure 13: Individual members in occupational pension schemes, 2002 and 2003
- A blanket scheme may not be the answer
- ABI survey on compulsion
- Towards a more integrated single European market
- European pensions
Market Size
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- Personal pension assets under management
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- Figure 14: Pension fund contributions, by type of scheme, 1995-2002
- Stakeholder pensions have only been a partial success
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- Figure 15: New individual pension business, 1999-2004
- Herd instinct partly shapes the market
- GPP schemes account for 43% of individual business
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- Figure 16: Value of new individual pensions business, by product type*, 1999-2004
- The standard personal pension will remain the recommended option for some
- Personal pensions offer a transportable solution
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- Figure 17: Employer-sponsored stakeholder scheme, main connotations, February 2005
- The average contribution to a standard personal pension has risen 35%
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- Figure 18: Average contributions to regular-premium individual pension schemes, 2003 and 2004
- Average single-premium contributions increased by 4% in 2004
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- Figure 19: Average contribution to single-premium individual pension schemes, 2003 and 2004
- Demand for new standard personal pensions is deteriorating
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- Figure 20: New standard personal pensions business, 1999-2004
- Linked policies increasingly favoured by investors
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- Figure 21: Proportion of linked/non-linked new individual pensions business, 1999-2004
Key Players
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- The top five players account for roughly half of personal pensions business
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- Figure 22: Personal pensions providers in order of business ranking, by total UK net written premiums*, 2003
- Aviva is the highest ranked provider
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- Figure 23: Personal pensions providers, by rank, 2002 and 2003
- Aviva forecasts improved growth in 2005
- Standard life on a more even keel
Distribution and Advice
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- IFAs are the largest distributors
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- Figure 24: Distribution of new individual personal pensions*, Q1-Q3 2004
- Not just one of the herd
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- Figure 25: Distribution of new standard personal pensions*, Q1-Q3 2004
- Internet distribution
Advertising and Promotion
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- Promoting in a simplified world
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- Figure 26: Pensions advertising activity, February 2005
- Stronger promotional messages could result in new business
- Television advertising campaigns are unlikely to sway public opinion during 2005
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- Figure 27: Share of pension advertising, by outlet, 2004
- Methodology
- Advertising spend reflects the competitiveness of some players in the market
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- Figure 28: Top pension advertisers, 2004
- Providers are likely to stick with relatively low-level advertising activities
Consumer Financial Activity
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- Activity levels are down
- Relationship with the main financial services providers
- Saving and investment activity is set to slow
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- Figure 29: Savings, investment, borrowing and debt repayment – consumers’ expected activity, September 2003-December 2004
- People aged 30-39 are more likely to invest compared with other age groups
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- Figure 30: Consumers’ financial undertaking in the next six months, by income, age and region, September 2004
- Above average activity from those aged 40-49
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- Figure 31: Expected financial activity, by socio-economic group and income groups, December 2004 and average for the last 12 quarters
- Consumers are placing a deposit, but not much else
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- Figure 32: Leading financial activities planned in the next six months, December 2003-December 2004
- Mortgage demand reflects slowdown in the property sector
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- Figure 33: Intended mortgage and property purchase activity, June 2002-December 2004
- The position primarily unchanged among MFSPs
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- Figure 34: Leading main financial services providers, market shares, December 2003-December 2004
- RBS set to benefit from increased mortgage activity
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- Figure 35: Saving, investment and lending market sizes, by expected customer demand and brand leaders (overall % intending to undertake activity in brackets), December 2004
- RBS customers remain the most active – NatWest can also expect high business levels
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- Figure 36: Activity levels of main financial providers’ customer bases, December 2004
The Consumer
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- DE socio-economic groups are more likely to have a deficit in their retirement savings
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- Figure 37: Level of agreement to selected statements about saving, by gender, age and socio-economic group, November 2004
- Implications
- SIPP and standard personal pensions have similar penetration levels
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- Figure 38: Pension arrangements, November 2004
- ABs are most likely to favour SIPPs
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- Figure 39: Pension arrangements, by gender, age, socio-economic group and marital status, November 2004
- Implications
- High flyers favour full advice and full fee products
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- Figure 40: Pension arrangements, by lifestage, working status, gross annual household income and tenure, November 2004
- Implications
- Waitrose shoppers were more likely to contribute towards a personal pension
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- Figure 41: Pension arrangements, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, November 2004
- Implications
- Savings rates are too low for 16% of consumers
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- Figure 42: Agreement or disagreement with selected savings statements, by gender, age, socio-economic group and marital status, November 2004
- Implications
- Over a fifth of consumers are discouraged because of tax on savings
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- Figure 43: Agreement or disagreement with selected savings statements, by working status, lifestage, TV region and gross annual household income, November 2004
- Implications
- Mid-market tabloid readers are more likely to favour investing in property than savings products
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- Figure 44: Agreement or disagreement with selected savings statements, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, November 2004
- Implications
- A surprisingly small proportion of consumers would be encouraged to save by like-for-like government contributions
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- Figure 45: Top factors which would persuade consumers to save more, by gender, age, socio-economic group and working status, November 2004
- Implications
- The cost of raising a family prohibits a significant proportion of parents from saving
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- Figure 46: Top factors which would persuade consumers to save more, by lifestage, gross annual household income, commercial TV viewing and supermarket usage, November 2004
- Implications
Consumer Attitudes and Targeting Opportunities
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- Nearly a quarter of respondents said that a pension is still the best way of saving for retirement
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- Figure 47: Agreement with selected attitudinal statements, November 2004
- Implications
- Long-term investment products are the backbone of any savings strategy
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- Figure 48: Agreement with selected attitudinal statements about pensions, by gender, age, socio-economic group and marital status, November 2004
- Implications
- Offering appealing products alone does not make for a successful marketing strategy
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- Figure 49: Agreement with selected attitudinal statements about pensions, by lifestage, working status, Mintel’s Special Groups and gross annual household income, November 2004
- Implications
- Broadsheets are a key advertising medium for pensions providers
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- Figure 50: Agreement with selected attitudinal statements about pensions, by ACORN category, newspaper readership, commercial TV viewing and supermarket usage, November 2004
- Implications
- Continue to develop brand values and build market presence
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- Figure 51: Main factors influencing pensions choice, November 2004
- Implications
- Low-fee pension products are more likely to appeal to younger people
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- Figure 52: Main factors influencing pensions choice, by gender, age, socio-economic group and marital status, November 2004
- Implications
- Middle-income earners are more likely to favour low charges
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- Figure 53: Main factors influencing pensions choice, by lifestage, working status, gross annual household income and TV region, November 2004
- Implications
- Broadsheet readers focus on past performance and reputation
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- Figure 54: Main factors influencing pensions choice, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, November 2004
- Implications
- ABs and C1s are key targets for providers
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- Figure 55: Customer profile of supermarkets, by socio-economic group, November 2004
- Implications
- Consumer typologies
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- Figure 56: Consumer typology groups, November 2004
- Group 1: Uninformed
- Group 2: Penchant for Pensions
- Group 3: Spurned Savers
- People aged 45-54 favour pensions
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- Figure 57: Consumer typology groups, by gender, age, socio-economic group and lifestage, November 2004
- Spurned Savers are more likely to live in the South
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- Figure 58: Consumer typology groups, by working status, TV region, presence of children, newspaper readership and commercial TV viewing, November 2004
Industry Views
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- Advertising expenditure
- Product development
- Market development in 2005
- The impact of low-fee products
- Internet distribution
- IFA distribution
The Future
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- The return of the pensions principle
- Commission prices will drift up
- The effects of depolarisation
- Preparation, preparation, preparation
- Will the increase in the SHP cap enable providers to inject some stimulus into the market?
- The Pensions Commission
Forecast
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- Figure 59: Forecast of new individual pension business in the UK**, 2004-09
- Factors incorporated in the forecast
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