Table of Contents
Issues in the Market
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- Key issues
- Market definitions
- The State System
- The voluntary private funded sector
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- Figure 1: Types of private pension provision, UK
- Abbreviations
Insights and Opportunities
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- A large untapped market implies major opportunity
- Scope to transform spending priorities
- Young working women are key to new business
- Boost take-up among wealthy cohabiting couples
- A constant approach is needed to build consumer confidence
- Taxing pension income at a reduced rate would be an ideal incentive
- Personal accounts: a solution to the pensions problem?
- A cautionary note
- Estimated size of the target market for personal accounts
Market in Brief
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- At the heart of the matter
- An improving savings and investment climate
- New proposals announced to boost participation
- Competitive forces at play
- Legislative changes boost pension transfers and new sales
- Contributions are also up
- IFAs produce the lion’s share of business
- Contraction in supply
- Advertising activity boosted by rising demand
- Nearly half of all non-retired adults are saving in a pension
- Public opinion of pensions is fairly low…
- … but there is promising support for personal accounts
- Winning over non-pension savers
Fast Forward Trends
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- Am I bovvered? ‘Generation why?’
- Definition
- Context
- Market touchpoints/implications
- Trust in me
- Definition
- Context
- Market touchpoints/implications
- Home as pension
- Definition
- Context
- Market touch points/implications
Broader Market Environment
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- Key points summary:
- The ‘demographic time bomb’
- Implications
- Changing work patterns
- Implications
- Economic backdrop
- Implications
- Stronger growth for savings forecast
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- Figure 2: Total PDI, consumer expenditure and savings, 2002-11
- Implications
- Recent stockmarket woes still resonate…
- Final-salary scheme closures
- Crisis in confidence
- … although the Footsie continues on an upward path
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- Figure 3: FTSE 100 and FTSE All Share – daily index movements, December1999-December 2006
- Broker predictions are cautiously positive
Internal Market Environment
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- Key points summary:
- Pension participation is declining, when it should be increasing
- Current private pension coverage
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- Figure 4: Participation in private pension schemes, November 2006
- Alternative arrangements
- Reasons behind lack of pension provision
- Psychological barriers
- An issue of trust
- Physical barriers
- Affordability
- Consumer apathy
- Lack of understanding
- Pensions reform
- Pensions Bill
- Second Pensions White Paper
- Personal accounts – a new mechanism for saving
- Low charges are unworkable, say pensions industry
- Positive implications
- Employer opposition
- Complement, not compete
- Some existing schemes could move upmarket
- But others could trade down
- Pensions simplification and a new tax regime
- Implications and expectations
- Immediate effects
- Inheritance tax U-turn
- Proposals reduce the appeal of family SIPPs
Competitive Context
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- Key points summary:
- Pensions compete with a host of other financial priorities
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- Figure 5: Contextual model for private pensions – money flows
- Pension alternatives
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- Figure 6: Retirement funding strategies
- Strong growth in second property market
- ISAs are another popular retirement saving vehicle
- Using the business to fund retirement
- Limited options for those without retirement savings
- The core challenge is one of persuasion
Strengths and Weaknesses in the Market
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- Figure 7: The UK pensions market – key strengths and weaknesses, 2006
- Complexity
- Increased costs
- Stakeholder pensions fail to hit the mark
- Compulsory enrolment
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Who’s Innovating?
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- Depolarisation has exerted a subtle influence
- Technological advances
- Stakeholder pensions fail to capture the public’s imagination
- Personal accounts: will they stifle or boost innovation?
The Non-Saver Target Market
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- The size of the target audience for personal accounts
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- Figure 8: The size of the non-saver target market, November 2006
- Exemptions
Trade Perspective
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- About the participating companies
- How have A-Day changes impacted on new pensions business?
- Personal accounts: good or bad idea?
- Which approach is best?
- What impact will the new scheme have on existing arrangements?
- What innovations are likely over the short-term?
Market Size and Forecast
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- Key points summary:
- Employer pension contributions have increased strongly…
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- Figure 9: Contributions to private pension schemes – UK, 2001-05
- … but individuals need to contribute more
- New individual pensions sales storm ahead in 2006
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- Figure 10: Individual pension sales, 2001-06
- Factors behind the growth
- Record year for SIPP providers
- Moving into the mainstream
- Steady growth forecast
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- Figure 11: Forecast of individual pension sales, 2006-11
- The group single-premium sector sees impressive growth
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- Figure 12: Group pension sales, 2001-06
- Growth areas
- Single-premium group sales are set to rise further
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- Figure 13: Forecast of group pension sales, 2006-11
- Factors incorporated
Market Share
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- Key points summary:
- The changing composition of the market
- A banking offensive
- Standard Life tops the new pensions business rankings
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- Figure 14: Top ten UK pensions providers, by new premium income, 2005
- Changes to top five
- New pensions business boosted by A-Day changes
Companies and Products
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- Winning products
- SIPPs: the vehicle of choice for consolidating multiple pension funds
- Profiles of the top five largest pensions providers
- Standard Life
- Scottish Widows
- Norwich Union
- AEGON Scottish Equitable
- Friends Provident
Brand Communication and Promotion
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- Key points summary:
- The importance of branding
- Establishing a relationship with the target market
- A successful brand can help new business acquisition
- Use of consumer advertising is fairly limited…
- …but it is on the increase
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- Figure 15: Total advertising expenditure on selected pension products, 2002-06
- Adspend is concentrated on the press
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- Figure 16: Proportional distribution of pensions adspend, by media type, 2002-06
- Scottish Widows was the leading pensions advertiser in 2006
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- Figure 17: Advertising expenditure by the top ten pensions advertisers, 2005 and 2006
Channels to Market
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- Key points summary:
- Most pension business is sold with advice
- Individual pension sales via bancassurance route more than double in 2006
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- Figure 18: Individual pensions premiums, by sales channel, 2001-06
- Bancassurance model proving successful
- Single-tie channel recovers its share of new regular premiums in 2006
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- Figure 19: Proportional distribution of individual regular-premium business, by sales channel, 2001-06
- Direct sales account for a very small proportion of new single premiums
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- Figure 20: Proportional distribution of individual single-premium business, by sales channel, 2001-06
- IFAs help drive group pension sales in 2005-06
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- Figure 21: Group pensions premiums, by sales channel, 2001-06
- IFA channel picks up share of new group regular premiums in 2006
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- Figure 22: Proportional distribution of group regular-premium business, by sales channel, 2001-06
- Direct sales continue to recede in the single-premium group sector
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- Figure 23: Proportional distribution of group single-premium business, by sales channel, 2001-06
Consumer Financial Activity
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- About the Financial Activity Bulletin
- Activity levels look set to drop sharply
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- Figure 24: Savings, investment, borrowing and debt repayment – consumers’ expected activity, June 2005-September 2006
- UK savings and spending climate
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- Figure 25: UK savings and spending climate – indexed, January 2001-October 2006
- Subdued picture across all sub-groups
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- Figure 26: Expected financial activity, by socio-demographic and income groups, September 2006 and average for the last 19 quarters
- Less appetite for pensions savings going forward
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- Figure 27: Leading financial activities planned in the next six months, September 2005-September 2006
- Property intentions may be hit by the rate rise
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- Figure 28: Intended mortgage and property purchase activity, September 2004-September 2006
- Identifying the main financial services providers
- Bank of Scotland and Halifax customers will be the busiest
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- Figure 29: Activity levels of main financial services providers’ customer bases, September 2006
- NatWest and Barclays customers are looking to repay debt
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- Figure 30: Activity intentions and current household financial situation, by MFSP, September 2006
The Consumer – Pension Participation
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- Key points summary:
- Survey background
- Just over half of all non-retired adults are not saving in a pension
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- Figure 31: Proportion of adults contributing to a pension, by type of scheme, November 2006
- Options for leavers
- The gender divide
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- Figure 32: Proportion of adults making pension contributions, by gender, age, socio-economic group, marital status and lifestage, November 2006
- Pension participation is highest among the middle-to-high age groups
- Single people are least likely to have pension savings
- Pension participation increases up the socio-economic scale
- Working status and wealth heavily determine take-up
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- Figure 33: Proportion of adults making pension contributions, by working status, household income, tenure, region and ACORN category, November 2006
- Regional variations
- Most pension holders are saving less than £100 a month…
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- Figure 34: Pension-holders’ monthly contributions, by type of pension, November 2006
- Implications
- …but the majority say that they could contribute more
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- Figure 35: Proportion of pension holders who could afford to save more, November 2006
- Additional analysis
The Consumer – Attitudes and Expectations
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- Key points summary:
- Coming up
- Many people are put off by ever-changing pension rules
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- Figure 36: Views on retirement and pension rules, November 2006
- Implications and opportunities
- One in four pension savers worry about how they’ll manage financially when they retire
- Implications and opportunities
- Most non-pension savers do not want to work beyond age 60/65
- Implications and opportunities
- 3 million can’t afford to retire
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- Figure 37: Cross-analysis – views on retirement and pension rules, November 2006
- The closer people get to retirement, the more they are likely to worry
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- Figure 38: Views on retirement and pension rules, by gender, age, socio-economic group, working status, household income and region, November 2006
- Less than a third of non-retired adults believe a pension is the best way to save for retirement…
- … while two fifths think pension income shouldn’t be taxed
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- Figure 39: Agreement with statements about pensions, November 2006
- Implications and opportunities
- Confidence lost
- Is property a better bet?
- Some support for compulsion
- Means testing – striking the right balance
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- Figure 40: Cross-analysis – agreement with statements about pensions, November 2006
- Opportunity to restore public faith in pensions
- Government still needs to iron out confusion over means testing
- ABs and Londoners are most pro compulsion
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- Figure 41: Agreement with postive statements about pensions, by gender, age, socio-economic group, working status, household income and region, November 2006
- More support for pensions in the South
- Few are aware of, or value, tax relief on contributions
- Women have greater confidence in pension companies than men
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- Figure 42: Agreement with negative statements about pensions, by gender, age, socio-economic group, working status and region, November 2006
- Self-employed favour property over a pension
- Two in three of those in the £35K-50K income group think that taxing pension income is unfair
- A much greater proportion like the idea of a national pension scheme than dislike it
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- Figure 43: Attitudes towards personal accounts, November 2006
- A minority of existing pension savers express interest in transferring into the new scheme
- Some are concerned about the cost implications
- Personal account typologies
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- Figure 44: Population segmented by attitudes towards personal accounts, November 2006
- Typology make-up
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- Figure 45: Attitudes towards personal accounts, by typology, November 2006
- Positive in Principle (25%)
- Conditionally Keen (23%)
- Undecided (28%)
- Cynical (24%)
- The Undecided are least likely to be saving in a pension
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- Figure 46: Pension saving profile, by typology, November 2006
- ABC1s are most likely to be Positive in Principle
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- Figure 47: Personal account typologies, by gender, age, socio-economic group, marital status and lifestage, November 2006
- Low-middle income groups have a strong tendency to be Conditionally Keen
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- Figure 48: Personal account typologies, by working status, household income, tenure, region and ACORN category, November 2006
The Consumer – Reaching Non-Pension Savers
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- Key points summary:
- Coming up
- CHAID analysis identifies the main drivers
- What is CHAID analysis?
- The main target groups identified
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- Figure 49: Target groups identified for the UK pensions market, November 2006
- Driver 1: age
- Driver 2: income
- There are many reasons why people choose not to save in a pension…
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- Figure 50: Reasons for not saving in a pension, November 2006
- …although financial factors play a prominent part…
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- Figure 51: Reasons for not saving in a pension, by gender, age, socio-economic group, marital status and lifestage, November 2006
- …particularly for low-income groups
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- Figure 52: Reasons for not saving in a pension, by working status, household income, tenure, region and ACORN category, November 2006
- What would encourage them to save more?
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- Figure 53: Factors that would encourage people to start/save more in a pension, November 2006
- Implications and opportunities
- Cluster analysis
- What is cluster analysis?
- Pension clusters
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- Figure 54: Population segmented by the factors that would encourage them to start or save more in a pension, November 2006
- Cluster composition
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- Figure 55: Factors that would encourage people to start or save more in a pension, by cluster, November 2006
- Multi-influenced (8% of the sample)
- Employer-led (18% of the sample)
- Self-directed (21% of the sample)
- Doubtful (53% of the sample)
- Three fifths of the Multi-influenced are non-pension savers…
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- Figure 56: Proportion contributing to a pension, by type and cluster, November 2006
- …and 70% of these think pension income shouldn’t be taxed
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- Figure 57: Agreement with statements about pensions and retirement plans, by cluster, November 2006
- The Multi-influenced and Self-directed are most interested in personal accounts
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- Figure 58: Attitudes towards personal accounts, by cluster, November 2006
- Around a quarter of 25-34-year-olds are Employer-led
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- Figure 59: Pension clusters, by gender, age, socio-economic group, marital status and lifestage, November 2006
- Those living in the North West and Urban Prosperity areas prefer to be Self-directed
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- Figure 60: Pension clusters, by working status, household income, tenure, region and ACORN category, November 2006
- Heavy TV viewers and Iceland shoppers are the most Doubtful
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- Figure 61: Pension clusters, by new technology usage, newspaper readership, commercial TV viewing and supermarket usage, November 2006
- Non-pension savers need the most persuasion
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- Figure 62: Clusters segmented by pension saving activity, November 2006
- Over a quarter of Multi-influenced and Employer-led non-pension savers are gripped by inertia
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- Figure 63: Reasons for not saving in a pension, by cluster, November 2006
- Two fifths of Employer-led non-pension savers could afford to save over £50pm
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- Figure 64: Amount able to save in a pension per month, by cluster (non-pension savers only), November 2006
- Further analysis
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