Table of Contents
Issues in the Market
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- Key issues in the market
- Abbreviations
Future Opportunities
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- The case for ‘special’ access to pension funds
- Pension scheme members need ‘Simplicity and Convenience’
- The Rise of the Group SIPP?
- Recent market crashes have exposed flaws in conventional wisdom
- The move to fee-based remuneration likely to benefit smaller providers
Market in Brief
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- Scheme size and membership
- Pension contributions
- Healthy rise in new insurance-administered business in 2008
- IFAs boost their share of company pension distribution in 2008
- Job security and satisfaction top priorities for employees – not pension
- Firms continue to cut back occupational pension provision
- Current economic difficulties could hinder short-term growth
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- Figure 1: Working age unemployment rate, 2004-09
- Standard Life tops insurance-administered pension market share table
- Brand communication and promotion
- Key consumer research findings
- Pension product ownership
- Length and value of contributions
- Attitudes and behaviour towards pensions in general
- Attitudes and behaviour towards workplace pensions
Internal Market Environment
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- Key points
- Job security and satisfaction top priorities for employees not pension
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- Figure 2: Factors considered important to employees, January 2009
- Firms continue to cut back occupational pension provision
- Trust-based schemes still have some advantages…
- …but qualified trustees are becoming hard to find
- DC contribution levels are inadequate
- More employers are likely to adjust contribution levels
- Some individuals are not joining a company scheme
- Only a minority actively monitor their pension savings
- Active management might be better left to the experts
- Past mistakes have undermined faith in pensions
- The 2009 budget introduces a change in pension tax rules…
- …but also raises major concerns about government meddling
- A more stable pensions legislative environment is needed
- The planned launch of Personal Accounts in 2012…
- …and its possible impact on the pensions industry
- Auto-enrolment likely to create some issues
- The PPF provides protection but is expensive
- Current economic difficulties raise concerns over the PPF
- Pension buyout market activity likely to continue…
- …but are insurers taking on too much risk?
- Smaller providers could benefit from the move to fee-based remuneration
Broader Market Environment
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- Key points
- Life expectancy on the rise
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- Figure 3: Cohort life expectancy at age 60, by gender, 1981-2056
- Average pensioner income drops significantly after 75
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- Figure 4: Average gross weekly income of pensioner units*, by age, 2007/08
- Old age dependency ratio rising
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- Figure 5: Projected size of the UK population, by age band, 2008-46
- Working beyond retirement age
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- Figure 6: UK economic activity, by gender and age, 2002-10
- Social trends and increased job mobility
- Economic conditions may hinder saving rates…
- …but intentions to pay into a pension have been rising
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- Figure 7: Intended life and pensions activity, Q3/Q4 2002- Q1/Q2 2009
- Stock market’s poor performance can damage faith in pension saving
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- Figure 8: FTSE 100 and FTSE All-Share – daily index movements, April 2002-April 2009
- Unemployment rate rises to 7.1%
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- Figure 9: Working age unemployment rate, 2004-09
Competitive Context
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- Key points
- Alternatives and supplements to workplace-based pensions
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- Figure 10: Summary of retirement funding strategies
- Pensions and pension alternatives
- Personal Accounts will compete at the lower end of the market
- Non-pension alternatives
- ISAs
- Buy-to-let property
Strengths and Weaknesses in the Market
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- Figure 11: Occupational/group pensions – SWOT analysis, 2009
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Who’s Innovating?
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- Key points
- Friends Provident considering ‘employee benefits’ wrap
- BlackRock/Towers Perrin stochastic model
- The Scottish Life online pension scheme reporting tool
- AWD Chase de Vere offers pension monitoring tool
- AXA introduces ‘Save More Tomorrow’ company pension scheme
- AEGON adds loyalty discount to Group Pensions offering
- HSBC offers employees group SIPP alongside ‘Sharesave’ scheme
- BT sets minimum annual employer contribution into Group SIPP
Scheme Size and Membership
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- Key points
- Private sector occupational pension scheme membership on the decline
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- Figure 12: Number of private sector occupational pension schemes in the UK, by scheme size, 2003-07
- Status of private and public sector schemes
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- Figure 13: Status of private and public sector schemes, 2007
- DC schemes significantly outnumber DB schemes
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- Figure 14: Number of open and closed private sector single-section schemes, by benefit structure and size band, 2007
- Active occupational scheme membership
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- Figure 15: Number of active occupational scheme members, by sector, 1991-2007
- Over three quarters of active members were contracted out in 2007
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- Figure 16: Active members of private sector schemes, by route to being contracted out, 2007
Value of Funded Pensions
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- Key points
- 18% of pension funds held in the insurance administered sector in 2007
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- Figure 17: Value of assets in funded pensions, in real terms, 1997-2007
Pension Contributions
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- Key points
- Slowdown in overall contributions in 2007
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- Figure 18: Contributions to private pension schemes, by scheme type – UK, 2002-07
Market Size and Forecast - Insurance-Administered Sector
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- Key points
- Rise in new business in 2008 as companies fund deficits
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- Figure 19: New insurance-administered occupational pension business, 2001-09(est)
- In-force business reflects a decline in membership
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- Figure 20: Insurance-administered occupational pension business in force, 2002-07
- Buyout market nearly doubles in 2008
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- Figure 21: New insurance-administered occupational pension business, by sub-sector, 2007 and 2008
- Forecast
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- Figure 22: Forecast of new insurance-administered occupational business, 2004-14
- GPP market size
- New single-premium GPP contracts rise significantly
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- Figure 23: New GPP business, 2002-09
- In-force GPP business
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- Figure 24: GPPs in force, 2002-07
- Forecast
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- Figure 25: Forecast of new GPP business, 2004-14
- Factors incorporated
Market Share
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- Key points
- A shuffle among the top five occupational pension providers in 2007
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- Figure 26: Top 20 insurance companies in the occupational pensions market, based on UK gross written premium, 2006 and 2007
- Lloyds top in the individual pension market
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- Figure 27: Top 20 insurance companies in the individual pensions market, based on UK gross written premium, 2006 and 2007
- Top occupational pension providers also active in group pensions
- Swiss Re and Deutsche Bank buy their way in
Companies and Products
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- Supply structure
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- Figure 28: The main participants in the occupational pensions market
- Employers
- Insurers
- Standard Life
- Prudential
- AEGON
- Legal & General
- Canada Life
- Investment management
- Pension IFAs
- Benefit consultants
- Other professional services
Brand Communication and Promotion
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- Key points
- Direct advertising of company pensions to consumers is rare
- Pensions adspend declines by nearly 50% in the year to April 2009
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- Figure 29: Pension-related advertising expenditure, by sub-category, year to April 2005-09
- Smaller provider adspend plummets
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- Figure 30: Pension-related advertising expenditure, by top ten advertisers, year to April 2005-09
- Press takes up 60% of total adspend on pensions
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- Figure 31: Overview of media type used to advertise pensions-related products, year to April 2008 and 2009
Channels to Market
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- Key points
- Most company pension business sold with advice
- EBCs are active in the sale of group pensions
- IFAs boost their share of new occupational pension regular premiums
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- Figure 32: Distribution breakdown of new insurance-administered occupational pension business – regular premium, 2003-08
- Demand for independent advice even stronger for single premiums
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- Figure 33: Distribution breakdown of new insurance-administered occupational pension business – single premium, 2003-08
- Over 90% of new regular- and single-premium GPP sales sold via IFAs
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- Figure 34: Distribution breakdown of new insurance-administered GPP business – regular and single premium, 2003-08
The Consumer – Pension Product Ownership
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- Key points
- Just over a third of non-retired adults are saving in a workplace pension
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- Figure 35: Ownership of pension products, by type, January 2009
- Cross-ownership of pensions
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- Figure 36: Ownership of pension products and retirement savings – cross-analysis, January 2009
- Age and workplace pension membership
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- Figure 37: Pension ownership, by age, January 2009
- Wages and socio-economic status
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- Figure 38: Pension ownership, by socio-economic group and gross annual household income, January 2009
- Pension ownership by technology and media usage
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- Figure 39: Type of pension owned. by daily newspaper readership, technology usage, internet usage frequency and web usage, January 2009
The Consumer – Length and Value of Contributions
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- Key points
- Length of contributions
- 51% of workplace pension holders contributing for over ten years
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- Figure 40: Number of years making pension contributions, by type of pension, January 2009
- The value of contributions rises over time
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- Figure 41: Number of years making pension contributions, by value of contributions, January 2009
- Some last-minute pension saving among the 45-64s
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- Figure 42: Number of years making pension contributions, by age, January 2009
- Income and length of contributions
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- Figure 43: Number of years making pension contributions, by gross annual household income, January 2009
- Value of contributions
- One in five workplace pension savers paying in £100-199 a month
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- Figure 44: Monthly pension contributions, by type of pension, January 2009
- Monthly contributions rise with age
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- Figure 45: Monthly pension contributions, by gender, age, lifestage and marital status, January 2009
- Unsurprisingly wealthy contributing the most to pension pots
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- Figure 46: Monthly pension contributions, by socio-economic group, working status, gross annual household income, TV region and household tenure, January 2009
- Media and technology usage and the value of contributions
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- Figure 47: Monthly pension contributions, by daily newspaper readership, technology usage, internet usage frequency and web usage, January 2009
The Consumer – Attitudes and Behaviour towards Pensions in General
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- Key points
- Workplace pension members show the most faith in pension savings
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- Figure 48: Attitudes towards pension-based savings, by type of pension, January 2009
- Signs of greater engagement among younger consumers?
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- Figure 49: Attitudes towards pension-based savings, by gender, age, lifestage and marital status, January 2009
- Wealthy tend to have a positive view on pension saving
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- Figure 50: Attitudes towards pension-based savings, by socio-economic group, working status, gross annual household income, TV region and household tenure, January 2009
- Opinions on pensions by media and technology usage
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- Figure 51: Attitudes towards pension-based savings, by daily newspaper readership, technology usage, internet usage frequency and web usage, January 2009
The Consumer – Attitudes and Behaviour towards Workplace Pensions
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- Key points
- Employees do not appear to appreciate the value of workplace pensions
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- Figure 52: Attitudes and experiences about saving in a workplace-based pension, by type of pension, January 2009
- Very few interested in choosing where investments are held
- Younger consumers likely to put less emphasis on the company pension
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- Figure 53: Attitudes and experiences about saving in a workplace-based pension, by gender, age, lifestage and marital status, January 2009
- A case for offering younger savers ‘special’ access to pension funds
- The more affluent one is, the more value placed on the company pension
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- Figure 54: Attitudes and experiences about saving in a workplace-based pension, by socio-economic group, working status, gross annual household income, TV region and household tenure, January 2009
- Little evidence that consumers desire choice of investment
- Trust an issue among the less affluent
- Media usage and workplace pensions
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- Figure 55: Attitudes and experiences about saving in a workplace-based pension, by daily newspaper readership, technology usage, internet usage frequency and web usage, January 2009
The Consumer – Targeting Opportunities
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- Key points
- Key target groups
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- Figure 56: Pension savings attitudinal groups, January 2009
- Hesitant
- Unresponsive
- Workplace Savers
- Pension Savvy
- Pension Savvy show highest level of pension ownership
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- Figure 57: Pension savings attitudinal groups, by pension product ownership, January 2009
- Over a third of the Pension Savvy own more than one pension product
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- Figure 58: Pension savings attitudinal groups, by number or products owned, January 2009
- Two thirds of the Pension Savvy contributing £100 or more a month
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- Figure 59: Pension savings attitudinal groups, by value of contributions, January 2009
- Further evidence of the decline in pension provision
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- Figure 60: Pension savings attitudinal groups, by length of contributions, January 2009
- Workplace Savers and the Pension Savvy more likely to be high earners
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- Figure 61: Pension savings attitudinal groups, by gender, age, socio-economic group, lifestage and gross annual household income, January 2009
- Multiple pension ownership indicates a market for group SIPPs
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- Figure 62: Type of pension savings, by number of products held, January 2009
- One in four high earners own multiple pension products
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- Figure 63: Number of pension products held, by gender, age, socio-economic group, lifestage and gross annual household income, January 2009
Appendix – Definitions, Industry Structure and Legislation
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- Market background and definitions
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- Figure 64: Types of private pension provision in the UK
- Definitions
- Occupational schemes
- Individual pensions
- Group pensions
- GPPs vs group stakeholder and group SIPPs
- GPPs provide significant benefits for employers
- Workplace pensions structure
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- Figure 65: Types of workplace pension, 2007
- Scheme administration
- Benefit structures
- The role of the Pensions Regulator
- The Pensions Regulator and trustees
- Types of occupational scheme closure
- Reforming the UK pension system
- A-day pensions simplification
- Other definitions
Appendix – The Consumer: Pension Ownership
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- Figure 66: Type of pension owned, by gender, age, lifestage and marital status, January 2009
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- Figure 67: Type of pension owned, by socio-economic group, working status, gross annual household income, TV region and household tenure, January 2009
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- Figure 68: Type of pension owned. by daily newspaper readership, technology usage, internet usage frequency and web usage, January 2009
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Appendix – The Consumer: Length and Value of Contributions
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- Figure 69: Number of years making pension contributions, by gender, age, lifestage and marital status, January 2009
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- Figure 70: Number of years making pension contributions, by socio-economic group, working status, gross annual household income, TV region and household tenure, January 2009
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- Figure 71: Number of years making pension contributions, by daily newspaper readership, technology usage, internet usage frequency and web usage, January 2009
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