Table of Contents
Issues in the Market
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- Key Issues
- Abbreviations
Future Opportunities
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- Opportunities for advisers in the middle market
- Direct sales should grow as adviser numbers decline
- More may be attracted to the IFA profession post RDR implementation
- Advisers will be key in raising awareness about protected rights
Market in Brief
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- The number of directly authorised intermediaries still in decline
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- Figure 1: Number of FSA directly authorised retail intermediary firms, by primary category, January 2006-September 2009
- Despite tough economic conditions opportunities for advisers exist
- Scope for growth in workplace pensions
- FSA regulatory environment unfriendly to small firms
- Pension and retirement income distribution overview
- Market size – individual and group pensions
- In 2009 IFAs generated 79% of all new individual pension APE premiums
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- Figure 2: New APE* premiums into individual pensions, by type of pension and distribution channel, 2009 (est)
- IFAs generate majority of new annuity and income drawdown business
- Key IFA research survey results
- Client advice and expectations
- Prospects and future business intentions
- Opinions on regulation and Personal Accounts
Internal Market Environment
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- Key points
- Workplace pension provision continues to decline
- Individual pension industry could benefit over the long term
- Auto-enrolment will greatly boost pension participation
- Pension intermediaries and NEST
- NEST should boost annuity market over the long term
- Transfer levels decline after FSA criticism of pension switching advice
- MW Pensions SIPP fraud case raises the issue of trust
- Only 3% of FOS complaints are about IFAs
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- Figure 3: Financial services firms complained about, by sector, 2008/09
- Any type of SIPP can now hold protected rights funds
- Intermediaries are key in raising awareness
- Pension tax relief for wealthy to be pulled back from April 2011
- Concerns about the inconsistent government approach to pensions…
- …but potential benefits for advisers
FSA Regulatory Environment
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- Key points
- Market structure for financial advice
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- Figure 4: Basic overview of market for financial advice
- The Retail Distribution Review
- Defining ‘independent’ and ‘restricted’ advice
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- Figure 5: Proposed regulatory landscape 2013
- The elimination of commission bias
- Ongoing charges will be possible
- No revision of legacy business will be necessary
- Impact on product providers
- Advisers to use 'consultancy charging’ when selling GPPs
- Aviva poll reveals consumer opposition to paying fees for advice
- Raising prudential requirements ensures continued IFA consolidation
- RDR will definitely happen, Tories can only delay it
- Advisory firms generally welcome RDR proposals
- Some sceptical about RDR creating new opportunities for advisers
- Money Guidance Service could be fully introduced during 2010
- Impact on financial advice market
- Treating Customers Fairly
- Impact on IFAs
- FSA proposes to lower the minimum fee for IFAs by 45%
Broader Market Environment
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- Key points
- Retirement income needs to rise to keep up with increasing longevity
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- Figure 6: Cohort life expectancy at age 60, by gender, 1981-2056
- Pension intermediaries well placed to benefit from this trend
- UK set for an extended period of slow economic growth
- Consumer focus shifting toward savings
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- Figure 7: Total PDI, consumer expenditure and savings ratio, at current prices, 2004-13
- Stock markets have rallied in 2009…
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- Figure 8: FTSE 100 and FTSE All Share – daily index movements, December 2003-December 2009
- … but confidence in pensions is still damaged
- Uncertainty can be good for advice business
- Rising taxes and inflation should increase demand for pension tax relief
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- Figure 9: Monthly changes in the rate of annual inflation* and Bank of England base rate – UK, December 2005-December 2009
Strengths and Weaknesses
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- Figure 10: Market for pension related advice – SWOT analysis, 2010
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Who’s Innovating
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- Key Points
- IFA Life – social networking for advisers
- Scot Life introduces new pension business tracker for advisers
- Selectapension.com launches income drawdown comparison system
- Online real-time annuity underwriting from Partnership Assurance
- Zurich providing adviser support with launch of Zurich4pensions.co.uk
- SimplyBiz launches premium service for large IFA firms
- RDR support via Sesame
The Intermediary Marketplace
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- Key points
- The number of directly authorised intermediaries continues to decline
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- Figure 11: Number of FSA directly authorised retail intermediary firms, by primary category, January 2006 to September 2009
- The financial advice sector has held up relatively well…
- … but the RDR could push IFAs out of the financial advice sector
- The number of appointed representatives continues to rise
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- Figure 12: Number of directly authorised financial advice firms, year to September 2006-09
Distribution Overview
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- Key points
- Most new personal pension business driven by IFAs
- EBCs are active in group pension sales
- IFAs responsible for over three quarters of individual pension business
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- Figure 13: New APE* premiums into individual pensions, by distribution channel, 2005-09
- The share of IFA new sales has declined as more go direct
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- Figure 14: Proportional distribution of new pension annuity premiums, by sales channel, 2005-09
- IFAs increase their share of new Income drawdown business
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- Figure 15: Proportional distribution of new income drawdown premiums, by sales channel, 2005-09
- Individual pension distribution – detailed breakdown
- Personal pensions
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- Figure 16: Proportional distribution of new APE* premiums into personal pensions, by distribution channel, 2005-09
- Group personal pensions
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- Figure 17: Proportional distribution of new APE* premiums into group personal pensions, by distribution channel, 2005-09
- Individual stakeholder pensions
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- Figure 18: Proportional distribution of new APE* premiums into individual stakeholder pensions, by distribution channel, 2005-09
- Company-sponsored stakeholder pensions
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- Figure 19: Proportional distribution of new APE* premiums into company sponsored stakeholder pensions, by distribution channel, 2005-09
- SIPPs
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- Figure 20: Proportional distribution of new APE* premiums into SIPPs, by distribution channel, 2005-09
Market Size – Individual and Group Pensions
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- Key points
- Two consecutive years of decline in new individual pension business
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- Figure 21: New individual pension premiums, by product type, 2005-09
- Slowdown in transfer business drives down new premiums
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- Figure 22: Single premium transfer business, 2006-09
- Number of policies in force declines in 2008
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- Figure 23: Total number of policies and regular premiums from individual pensions business in force, by pension type, 2003-07
Market Segmentation by Type of Intermediary – Individual and Group Pensions
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- Key Points
- IFAs generated 79% of all new APE Premiums in 2009
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- Figure 24: New APE* premiums into individual pensions, by type of pension and distribution channel, 2009 (est)
- IFA share of new single premiums down nearly a quarter in 2009
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- Figure 25: Value of new premiums sold through independent intermediaries, by type of premium and pension, 2005-09
- Tie agents show best overall performance in a weak market
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- Figure 26: Value of new premiums sold through single-tie agents, by type of premium and pension, 2005-09
- £292 million in new APE sales generated via bancassurance in 2009
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- Figure 27: Value of new premiums sold through bancassurance, by type of premium and pension, 2005-09
- Non-intermediated new APE sales down more than a fifth
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- Figure 28: Value of non-intermediated new premiums, by type of premium and pension, 2005-09
Market Size – Annuities and Income Drawdown
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- Key points
- New pension annuity volumes rise while values decline
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- Figure 29: Size of the pension annuities market versus the income drawdown market - new business, 2005-09
- Income drawdown hit hard by the fall in pension fund values
Market Segmentation by Type of Intermediary – Annuities and Income Drawdown
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- Key points
- Tied agents manage to maintain new annuity premium levels in 2009
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- Figure 30: Value of new pension annuity premiums, by sales channel, 2005-09
- All channels experience a decline in new income drawdown premiums
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- Figure 31: Value of new income drawdown premiums, by sales channel, 2005-09
Companies and Products/Market Overview and Key Players
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- Major players in the IFA market
- The Tenet Group
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- Figure 32: Financial performance of Tenet Group, 2007 and 2008
- Sesame Bankhall Group
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- Figure 33: Financial performance of Sesame Limited, 2007 and 2008
- Figure 34: Contribution of each of the business units to Sesame Group’s revenue, 2007/08
- SimplyBiz
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- Figure 35: Financial performance of SimplyBiz, 2007 and 2008
- Key players in retail banking advice market
- Barclays Financial Planning
- Lloyds Banking Group plc/Scottish Widows
Brand Communication and Promotion
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- Key points
- Advertising financial advice
- £12.9 million spent advertising financial advice in 2009
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- Figure 36: Overview of total adspend on financial advice services, 2005-09*
- Direct mail and press most common forms of advertising
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- Figure 37: Overview of media type used to advertise financial advice services, 2009*
- Providers advertising products to intermediaries
- Pension providers’ intermediary-directed adspend totals £1.98 million
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- Figure 38: Total intermediary-directed adspend, by product type, 2005-09
- Top ten responsible for 78% of all pension and annuity adspend in 2009
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- Figure 39: Top ten advertisers of pension and annunity products to intermediaries, 2005-09
- Press dominates intermediary-directed advertising
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- Figure 40: Top ten publications used by providers to advertise pension and annuity products to intermediaries, 2005-09
The IFA: Client Advice and Expectations
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- Key points
- Two in five IFAs believe generating new pension business will remain difficult
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- Figure 41: IFA expectations of how current economic climate will impact new pension business, December 2009
- 85% of IFAs recommend clients place money into collectives
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- Figure 42: Where IFAs are recommending their clients invest their money, December 2009
The IFA: Prospects and Future Business Intentions
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- Key points
- Confidence in business prospects improved throughout 2009
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- Figure 43: Confidence about business prospects compared to six months prior, January-December 2009
- IFAs: Government not doing enough to encourage pensions savings
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- Figure 44: Biggest challenges facing pension intermediaries, January and December 2009
- By year-end 2009 more IFAs reported they plan on shifting to fees
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- Figure 45: Key business intentions over the next 12 months, January-December 2009
The IFA: Opinions on Regulation and Personal Accounts
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- Key points
- Many IFAs still unconvinced of the benefits of the RDR
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- Figure 46: Opinions on the impact of the Retail Distribution Review on IFA business, January-December 2009
- Enthusiasm for the Treating Customers Fairly initiative has waned
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- Figure 47: Opinions on the impact of the Treating Customers Fairly initiative on IFA business, January-December 2009
- Most IFAs believe Personal Accounts will have no impact on their business
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- Figure 48: Opinions on the impact of Personal Accounts on IFA business, January-December 2009
Appendix – Broader Market Environment
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- Figure 49: Trends in the age structure of the UK population, by gender, 2004-14
- Figure 50: Average gross weekly income of pensioner units*, by age, 2008/09
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