Table of Contents
Introduction and Abbreviations
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- Scope of the report
- Key sources
- Market definitions
- The State System
- The voluntary private funded sector
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- Figure 1: Types of private pension provision, UK
- Global information and research
- Consumer research
- ACORN
- Abbreviations
Premier Insight
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- A new name for a product that must instil trust
- Get up close and personal
- Switch the nature of the decision
- Urgent need for education
- Targeted advertising will create interest
- DB schemes can be affordable
- Small firms need state support
Executive Summary
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- At the heart of the problem
- The non-savers and barriers to saving
- Developments at policy level
- Final-salary closure wave
- The contribution gap
- Moving back into the S2P
- The size of the market
- Education and communication
- Mintel’s key consumer research findings
- Future challenges
- Market forecast
Market Background
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- A pensions industry in distress
- External factors hurt the public purse
- Key findings of the Pensions Commission’s first report
- Non-pension savings can’t be relied upon
- What are the options?
- Government response
- The Pensions Act 2004
- Other important changes to pensions regulation
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- Figure 2: Summary of recent and forthcoming events relating to pensions reform, 2005-06
- A new regulator for occupational schemes...
- ...and new measures to protect workers in occupational schemes
- Cutting through the red tape...
- ...and detangling the pensions web
- New rules will allow greater choice and flexibility
- Retirees will be able to defer their pension until after age 75
Market Factors
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- Demographic trends
- Increasing longevity poses a major challenge for policymakers...
- ...as well as the annuities market
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- Figure 3: Life-expectancy at age 50 and 65 for men and women, 1981-2051 (actual and projected)
- The impact of the baby boom generation
- Old age dependency ratio to increase rapidly
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- Figure 4: Projected size of the UK population and dependency ratios, 2005-66 (at intervals)
- Urgent action needed
- Economic and investment conditions
- Enjoying the party: a two-decade long bull market
- The morning after: the 2000-02 slump
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- Figure 5: FTSE 100 and FTSE All Share – daily index movements, April 1998-April 2005
- Employer activity
- Migrating away from final-salary scheme exposure
- Closure wave has gathered pace
- Why this matters so much
- Contribution rates are higher for DB schemes
- Finding the middle ground
- Following the TRACs
- The Employer Task Force
- Individual psychology and behaviour
- Physical barriers
- Psychological barriers
- Pensions u-turn – the S2P dilemma
Market Size and Trends
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- Private pension coverage
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- Figure 6: Participation in private pension schemes, April 2005
- Participation has declined for men and increased for women
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- Figure 7: Trends in occupational scheme coverage, by gender and working status, 1989-2003
- Coverage varies according to industry sector
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- Figure 8: GB pension scheme membership, by gender and industries, average for 2001-03
- Scheme membership
- Over 94,000 occupational pension schemes in 2004
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- Figure 9: Total number of occupational pension schemes, by size band, 2004
- Multi-employer schemes
- Trends in the number of private sector schemes
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- Figure 10: Number of live occupational pension schemes in the UK (excluding public service), by size band, 2000-04
- DC schemes now account for around 80% of all occupational schemes
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- Figure 11: Number of live occupational schemes (excluding public service), by benefit structure and size band, 2004
- Figure 12: Distribution of live occupational schemes (excluding public service), by benefit structure, 2004
- A significant proportion will be members of more than one scheme
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- Figure 13: Number of members in live occupational pension schemes (excluding public service), by size band, 2002-04
- Opt-out approach increases pension participation
- Trends in the number of ‘active’ members
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- Figure 14: Number of active members of occupational schemes, 1953-2004
- Four in five active private sector members were contracted out in 2004
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- Figure 15: Number of active members in private sector occupational schemes with route to contracting out, April 2004
- Around one in eight active members were paying AVCs in 2004
- Private pension contributions
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- Figure 16: Preliminary ‘best estimate’ of contriubtions to pension schemes – UK, 1995-2002
- Big increases in employer contributions in 2003 and 2004
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- Figure 17: Total estimated pension contributions, 1999-2004
- Value of assets managed
- UK pension funds take a dive following 2000 stockmarket crash...
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- Figure 18: Funds held in UK pension schemes, at current prices, 1995-2003
- ...then start to recover in 2003
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- Figure 19: Funds held in UK occupational pension schemes, at constant 2002 prices, 2000-03
The Supply Structure
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- Figure 20: The main participants in the occupational pensions market
- Life offices
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- Figure 21: Occupational pensions rankings based on total UK net premiums (top ten), 2002 and 2003
- Employers
- Benefit consultants
- Pensions IFAs
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- Figure 22: Top ten pensions IFAs, by share of turnover, 2004
- Other professional services
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Promoting Occupational Pensions
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- Effective communication is vital
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- Figure 23: Methods used by employers to communicate pensions information, 2004
- Pension providers also have a part to play in informing end-customers
- Very little in the way of above-the-line advertising...
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- Figure 24: Total advertising expenditure on selected pension products, 2000/01-2004/05
- ...so what’s the problem?
- Most advertising of occupational pensions is concentrated on the press
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- Figure 25: Top ten highest-spending advertisers – occupational/company pensions, 2003/04 and 2004/05
Consumer Financial Activity
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- About the Financial Activity Bulletin
- Activity levels set to rise in the six months from March 2005
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- Figure 26: Savings, investment, borrowing and debt repayment – consumers’ expected activity, December 2003-March 2005
- Those aged 30-39 will be most active over the next few months
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- Figure 27: Expected financial activity, by socio-demographic and income groups, March 2005 and average for the last 13 quarters
- A resurrection in savings activity...
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- Figure 28: Leading financial activities planned in the next six months, December 2003-March 2005
- …but prospects are more mixed for life and pension providers
- Key target groups
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- Figure 29: Key target groups: life and pensions activity, March 2005
- Mortgage index continues to edge low, while property purchase picks up
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- Figure 30: Intended mortgage and property purchase activity, September 2002-March 2005
- Lloyds TSB strengthens its number one position
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- Figure 31: Leading main financial services providers: market shares, March 2004-March 2005
- Abbey should boost its regular pensions business
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- Figure 32: Saving, investment and lending market sizes, by expected customer demand and brand leaders (overall % intending to undertake activity in brackets), March 2005
- Bank of Scotland has the most ‘active’ customers
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- Figure 33: Activity levels of main financial providers’ customer bases, March 2005
The Consumer and Product Ownership
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- Just under a third of non-retired adults are members of an occupational pension...
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- Figure 34: Proportion of adults who are regularly contributing to a pension, by type, April 2005
- ...while one in ten have an occupational pension which they no longer contribute to...
- ...and around half have no pension provision whatsoever
- Profiling non-pension holders
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- Figure 35: Profile of non-pension holders, by gender, age, socio-economic group, working status and gross annual household income, April 2005
- Sizing the target non-saver group
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- Figure 36: Calculating the size of the target non-saver group, April 2005
- Much confusion over pension type
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- Figure 37: Proportional split of occupational schemes, by benefit type, April 2005
- The gender discrepancy is less acute among occupational members
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- Figure 38: Proportion of adults who are active members of a pension scheme, by pension type and by gender, age, socio-economic group and working status, September 2004
- Active membership peaks in the 45-54 age group
- Single people are most vulnerable
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- Figure 39: Proportion of adults who are active members of a pension scheme, by pension type and by marital status, lifestage, Mintel’s Special Groups and age finished full-time education, September 2004
- Income and education are major determining factors
- Significant regional variation in pension membership
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- Figure 40: Proportion of adults who are active members of a pension scheme, by pension type and by region, tenure, gross annual household income and ACORN category, September 2004
- Light TV viewers record above-average membership of occupational pensions...
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- Figure 41: Proportion of adults who are active members of a pension scheme, by pension type and by new technology usage, newspaper readership, commercial TV viewing and supermarket usage, September 2004
- ...as do broadsheet and mid-market tabloid readers
- Profile of pension savers
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- Figure 42: Profile of active pension members, by gender, age, socio-economic group, working status and gross annual household income, April 2005
- DB members tend to be older
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- Figure 43: Profile of active occupational scheme members, by benefit type and by gender, age, socio-economic group, working status and gross annual household income, April 2005
- Half of pension holders have been making contributions for under a decade
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- Figure 44: Number of years making pension contributions, April 2005
- On average, DB members invest for longer
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- Figure 45: Number of years making pension contributions, by type of pension, April 2005
- A significant proportion have left starting a pension too late
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- Figure 46: Number of years making pension contributions, by gender, age, socio-economic group and working status, April 2005
- Over two fifths of pension holders do not know whether they are contracted in or out
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- Figure 47: Proportion of pension holders who are contracted in or out of the S2P, April 2005
- Personal pension holders are more clued up
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- Figure 48: Proportion of pension holders who are contracted in or out of the S2P, by type of pension, April 2005
- Half of female pension holders do not know if they are in or out
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- Figure 49: Proportion of pension holders who are contracted in or out of the S2P, by gender, age, scoio-economic group and household income, April 2005
- The longer people have been making contributions, the more likely they will stay out
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- Figure 50: Proportion of pension holders who are contracted in or out of the S2P, by number of years making contributions, April 2005
- Further analysis
Consumer Attitudes and Targeting Opportunities
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- CHAID analysis isolates the core target groups
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- Figure 51: Target groups identified for occupational and personal pensions, April 2005
- Three in five DC members ‘really value’ their employer’s contributions
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- Figure 52: Proportion of occupational pension/GPP holders who agree, by benefit type, April 2005
- Automatic payment of contributions is a bonus
- Nearly a fifth of those with a pension of ‘unknown type’ admit they don’t understand the difference
- Assessing transfer activity
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- Figure 53: The potential size of the transfer target market, April 2005
- Response rates vary according to length of investment time
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- Figure 54: Proportion of occupational pension/GPP holders who agree, by the number of years making contributions, April 2005
- One in five AB pension holders have access to a pensions adviser at work
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- Figure 55: Proportion of occupational pension/GPP holders who agree with selected statements, by
- Men are twice as likely to be Transfer Targets as women
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- Figure 56: Proportion of occupational pension/GPP holders who agree with selected statements, by
- One in three full-time workers support compulsion
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- Figure 57: Proportion who agree with pensions-related statements, April 2005
- One in five non-pension savers say they try not to think about it
- A small but significant proportion of employees have turned down a company pension
- Higher earners are more likely to advocate compulsion
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- Figure 58: Agreement with top four pensions-related sentimements, by gender, age, socio-economic group, working status and household income, April 2005
- Cluster analysis
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- Figure 59: Dissecting the consumer base into four pensions-related clusters, April 2005
- The Disengaged and Pensions Illiterate are in the most vulnerable positions
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- Figure 60: Proportion of adults who are regularly contributing to a pension, by cluster, April 2005
- One in four 18-34-year-olds are Disengaged
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- Figure 61: Pensions clusters, by gender, age, socio-economic group and working status, April 2005
- Pensions education should be targeted at families
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- Figure 62: Pensions clusters, by marital status, lifestage, Mintel’s Special Groups and age finished full-time education, April 2005
- One in five mortgagors are Responsibly Anxious
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- Figure 63: Pensions clusters, by region, tenure, household income and ACORN category, April 2005
- More than half of mid-market tabloid readers are Seemingly Unconcerned
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- Figure 64: Pensions clusters, by new technology usage, newspaper readership, commercial TV viewing and supermarket usage, April 2005
Industry Views
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- Is government policy moving in the right direction?
- Are small firms key to overcoming the pensions crisis?
- Should there be greater risk sharing?
- What should happen to the S2P?
- Will government reforms boost employee uptake of occupational pensions?
The Future
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- The task ahead
- Simplification should help promote provision...
- ...but will all be ready by April 2006?
- An end to the State Second Pension...
- ...or just a revamp needed?
- Moving towards greater risk sharing
- To compel or not to compel
Forecast
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- The number of private occupational schemes will continue to decline
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- Figure 65: Forecast of the number of live occupational pension schemes in the UK (excluding public service), 2005-10
- The ascension of pension fund contributions will prevail
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- Figure 66: Forecast of estimated pension fund contributions, at current prices, 2005-10
- Figure 67: Forecast of estimated pension fund contributions, at constant prices*, 2005-10
- A cautionary note
- Factors incorporated
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