Table of Contents
Introduction and Abbreviations
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- A final settlement for pensions?
- Report contents
- Market definitions
- Defined benefit
- Defined contribution
- Occupational pension scheme
- State pension (reform of the)
- Personal pension
- Self-invested personal pension
- Group personal pension
- Stakeholder pension
- Executive pension plan
- Additional voluntary contributions
- Global information and research
- Methodology
- Consumer research
- ACORN
- Abbreviations
Premier Insight
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- Ageing, under-funding and market apathy have forced change
- Personal accounts might be the only contributed scheme opportunity for the majority
- The quality of schemes will suffer
- Sponsors will now make choices about the future direction of private schemes
- Adapting to a changing infrastructure for pensions
Executive Summary
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- The number of active members declined by 1.2 million between 1983 and 2005
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- Figure 1: Number of active occupational pension scheme members, selected years, 1983-2005
- Pensions White Paper – employers might reconsider contribution levels
- Ageing, population growth and life-expectancy
- The total number of schemes has declined dramatically
- The supply chain and scheme administration
- Promotions in the occupational pensions market
- The largest proportion of active members were in a DB scheme
- The impact of pensions reform
Market Background
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- Around 10.8 million people are eligible for a personal account
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- Figure 2: Model of the pensionable population, 2004
- Pensions White Paper
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- Figure 3: Selected proposals from the pensions White Paper, May 2006
- Higher-level activities around pensions
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- Figure 4: Higher-level government objectives for pensions, June 2006
- Review of FAS
- Issues which encouraged government intervention
- Components of the Finance Act 2004
- More choice for pensioners
- Increasing scheme simplicity and flexibility
- The group SIPP option
- Activities of the Pensions Regulator
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- Figure 5: Codes of conduct recently introduced by the Pensions Regulator, June 2006
- Cross-border occupational pension schemes
- Portability of supplementary occupational pension rights within the EU
- Review of the impact of the personal account
Market Factors
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- Larger pension issues impact this market
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- Figure 6: Key issues regarding all pension types, June 2006
- Too much state help might cause tension
- Review of FRS17 and IAS19
- The burden on pensions will increase
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- Figure 7: Life-expectancy at age 50 and age 65 for men and women, 1981-2054
- Healthcare services will be pressured by longevity
- Between 2006 and 2074 the proportion of the population aged 65+ will increase by 100%
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- Figure 8: Projected size of the UK population and dependency ratios, by age group, 2006-74
- The cost of pensions to the state is on the increase
- Economic activity rates for older people are projected to increase
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- Figure 9: Projected economic activity rates for people aged 50+, by age group, 2006-20
- An underperforming stock market caused a perception that pension funds were deteriorating
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- Figure 10: FTSE 100 and FTSE All Share index, January 1996-May 2006
- Under-funding cases have damaged the image of company pensions
- Issues from the past will take time to fade away
Market Size and Trends
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- Membership of occupational pensions was higher for women in 2004
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- Figure 11: Proportion of occupational pensions, by gender, working status and industry, 2004
- The availability of occupational pensions to women in part-time work rose in 2004
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- Figure 12: Trends in occupational pensions, by gender and working period, 1989-2004
- The largest number of schemes were operated among the smallest employers in 2004
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- Figure 13: Number of employers offering a contribution to a pension scheme, by company size, 2004
- Employer contributions rose quickest between 2000 and 2005
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- Figure 14: Contributions to private pension schemes, 2000-05
- GAD foreword
- The number of private sector schemes declined by 26.5% between 2004 and 2005
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- Figure 15: Number of private sector schemes, by scheme size, 2001-05
- The smallest schemes accounted for 79.3% of this market in 2005
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- Figure 16: Proportion of schemes, by scheme size, 2004 and 2005
- The number of active employee members has declined by 1.5 million between 1995 and 2005
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- Figure 17: Number of active employee members, pensions in payment and preserved pension entitlements, 1995-2005
- There were 3.7 million active members in DB schemes in 2005
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- Figure 18: Active employee members, by scheme size and scheme type, 2005
- Members in DC schemes were more likely to make AVCs
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- Figure 19: Active employees contributing to AVCs, by scheme size and scheme type, 2005
- Funded pension investments increased in 2004
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- Figure 20: Level of investment in funded pensions, 2000-04
- Contracted-out salary-related schemes are popular
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- Figure 21: Number of contracted-out schemes, by route, 2005
The Supply Structure
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- Reform will force further change
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- Figure 22: Occupational pensions supply structure, June 2006
- Investment managers
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- Figure 23: Leading investment managers, by total group assets under management (worldwide), March 2006
- Scheme administrators and distributors
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- Figure 24: Most important reasons to use a third-party administrator, April 2005
- Employers
- Life offices
- Pensions consultants
- Pensions IFAs
- Other consultancy services
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- Figure 25: Additional services for occupational pensions, June 2006
Pensions Promotion
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- Some 6% of total pensions advertising expenditure was allocated to company pensions
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- Figure 26: Advertising expenditure on pensions, by product type, April 2005-March 2006
- Watson Wyatt was the largest advertiser between April 2005 and March 2006
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- Figure 27: Largest company pensions advertisers, April 2005-March 2006
- Pan-European advertising in company pensions
- End-user promotion
Consumer Financial Activity
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- Consumers looking to save and invest
- Relationship with the main financial services providers
- Overall activity levels will fall slightly
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- Figure 28: Savings, investment, borrowing and debt repayment – consumers’ expected activity, December 2004-March 2006
- C2s will display higher than average financial activity levels
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- Figure 29: Expected financial activity, by socio-demographic and income groups, March 2006 and average for the last 17 quarters
- Activity around alternatives to pension saving
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- Figure 30: Leading financial activities planned in the next six months, March 2005-March 2006
- Decline in expected pension contributions
- Slower activity ahead for the property market
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- Figure 31: Intended mortgage and property purchase activity, March 2004-March 2006
- Lloyds TSB sees its position weaken slightly
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- Figure 32: Leading main financial services providers: market shares, March 2005-March 2006
- RBS will feature strongly in the savings/deposits sector
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- Figure 33: Saving, investment and lending market sizes, by expected customer demand and brand leaders (overall % intending to undertake activity in brackets), March 2006
- Bank of Scotland and RBS will have the most active customer bases
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- Figure 34: Activity levels of main financial services providers’ customer bases, March 2006
- HSBC and Halifax customers looking to borrow more
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- Figure 35: Activity intentions and current household financial situation, by MFSP, March 2006
The Consumer
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- Occupational pensions are the largest pension category
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- Figure 36: Proportion of adults regularly contributing to a pension, by type, April 2006
- Simplification enables portability
- Career people might hold a number of pension types
- More senior employees are the most likely to regularly contribute
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- Figure 37: Proportion of adults regularly contributing to a pension, by gender, age, socio-economic group and working status, April 2006
- Implications
- Personal pensions appeal to a wider financial bracket
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- Figure 38: Proportion of adults regularly contributing to a pension, by lifestage, Mintel’s Special Groups, age/socio-economic group and region, April 2006
- Implications
- Broadsheets are a decent outlet for this market
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- Figure 39: Proportion of adults regularly contributing to a pension, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, April 2006
- Implications
- 68% of active members contributed to a DB scheme
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- Figure 40: Profile of active occupational pension members, by pension type, April 2006
- Lifestage priorities steer groups
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- Figure 41: Profile of active occupational pension members, by gender, age, socio-economic group, working status, lifestage and gross annual household income, April 2006
- Implications
- Alternative investments most likely to be held by women
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- Figure 42: Profile of non-pension/inactive pension holders, by gender, age and socio-economic group, April 2006
- Implications
- The mere availability of a pension is not a strong enough incentive to encourage contributions
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- Figure 43: Profile of non-pension/inactive pension holders, by working status, lifestage and gross annual household income, April 2006
- Implications
- PR activities could prove constructive
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- Figure 44: Profile of non-pension/inactive pension holders, by new technology users, newspaper readership, commercial TV viewing and supemarket usage, April 2006
- Implications
- 54% of respondents had been contributing for ten years
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- Figure 45: Period contributing to a company pension scheme, April 2006
- The period of contributions increases with age
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- Figure 46: Period contributing to a company pension scheme, by gender, age, socio-economic group, working status, lifestage and gross annual household income, April 2006
- Implications
- Users of M&S were most likely to have contributed for over 20 years
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- Figure 47: Period contributing to a company pension scheme, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, April 2006
- Implications
- The growing popularity of DC schemes is identifiable
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- Figure 48: Pension type versus period of contribution, April 2006
Consumer Attitudes and Targeting Opportunities
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- Company pensions should offer larger incentives
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- Figure 49: Statements regarding pension reform, April 2006
- Money talks in most cases
- Regulation is agreeable to some
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- Figure 50: Statements regarding pension reform, by gender, age and socio-economic group, April 2006
- Implications and opportunities
- More affluent individuals need flexibility
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- Figure 51: Statements regarding pension reform, by working status, lifestage and gross annual household income, April 2006
- Implications and opportunities
- Internet users could be better assessed for attitude towards risk
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- Figure 52: Statements regarding pension reform, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, April 2006
- Implications and opportunities
- Meeting expectations may be more important than product detail
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- Figure 53: Regularly contributing to a pension versus statements regarding pension reform, April 2006
- 79% of recent applicants felt that it is unrealistic to depend on the state pension
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- Figure 54: Contribution period versus statements regarding pension reform, April 2006
- Just 5% of consumers said that they would trust an investment management company with their retirement savings
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- Figure 55: Level of trust among retirement savings managers, April 2006
- The Internet offers a chance for independence
- Individually focused products might prove the best option for higher earners
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- Figure 56: Level of trust among retirement savings managers, by age, socio-economic group, working status, lifestage and gross annual household income, April 2006
- Implications and opportunities
- Use the Internet for scheme communications
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- Figure 57: Level of trust among retirement savings managers, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, April 2006
- Implications and opportunities
- 36% of regular contributors to a DB scheme have faith in employers' decisions
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- Figure 58: Proportion of adults regularly contributing to a pension versus level of trust among retirement savings managers, April 2006
- Financial incentives are favoured by independent types
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- Figure 59: Statements regarding pension reform versus statements regarding trust, April 2006
- ABs and full-time employees are the main targets for this market
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- Figure 60: CHAID analysis for occupational pensions, April 2006
- Consumer typologies
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- Figure 61: Consumer typologies identified for occupational pensions, April 2006
- Convinced
- Self-manage
- Affordability Issues
- Dependent
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- Figure 62: Occupational pensions typology groups, by gender, age, socio-economic group, working status and lifestage, April 2006
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- Figure 63: Occupational pensions typology groups, by gross annual household income and region, April 2006
Industry Views
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- Research indicates that 31% of employers with existing provision would consider levelling down
- A sensible framework from which to address the problems
- More scope to downsize occupational pension schemes
- Take-up is driven by the quality of employer engagement and communication
The Future
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- Minimum contributions for all?
- The impact of the White Paper will be significant
- A quality occupational pension will now grow to be more highly prized by employees
- 44% of active DB scheme members will be impacted by change
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- Figure 64: Proportion of active employees in schemes responding to the question, by scheme type, 2005
Forecast
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- The number of private occupational pension schemes is on a downward trend
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- Figure 65: Forecast of the number of private sector schemes, by scheme size, 2005-11
- Pension fund contributions show an upward trend
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- Figure 66: Forecast of contributions to private pension schemes, by scheme type, 2005-11
- Factors used in this forecast
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