Table of Contents
Issues in the Market
-
- Key issues
- The scope of this report
- Market background and definitions
- Investment risk
-
- Figure 1: Risk profile of selected savings and investments
- Investment bonds from life offices
- The smoothing effect of with-profits bonds
- Market Value Reductions (MVRs)
- Closed Funds
- Taxation
- Abbreviations
Future Opportunities
-
- Investors shift their focus towards capital growth
- Rebuilding trust in a market which has been suffering
Market in Brief
-
- Total new premiums fell substantially in 2008 and 2009
-
- Figure 2: Total number of new single-premium investment bond contracts and value of total new premiums, 2004-09
- Unit-linked bonds are the biggest product category
-
- Figure 3: Proportional distribution of investment bond sales by main product categories, based on total new premiums, 2005-09
- A sector that has been plagued by problems
- The recovery in global stock markets is good news for providers
- Collectives are the main alternative to an investment bond
-
- Figure 4: Retail sales of unit trusts and OEICs by IMA members, 2000-09*
- AXA/Winterthur was the market leader in 2008
-
- Figure 5: Top ten investment bond providers, by new premium income from single-premium life policies, 2006-08
- Investment bonds are typically sold through IFAs
-
- Figure 6: Investment bond distribution mix, based on total new premiums, 2008-09
- A niche product that targets mass affluent consumers
-
- Figure 7: Savings and investment products held, by value of investible assets, December 2009
Internal Market Environment
-
- Key points
- The influence of the stock market on investment bonds
- The fall from grace of the with-profits concept
- The collapse of AIG’s cash fund shook investor confidence
- The recent return of MVRs may have deterred investors
- High commissions put a question mark over impartial advice
- The complexity of the product is also a key issue
- The tax position of investment bonds is now less favourable…
- … but they are beneficial in a number of situations
- Regulatory developments
- The Retail Distribution Review
- Treating Customers Fairly
- Improving the transparency of with-profits funds
Broader Market Environment
-
- Key points
- An ageing population is good news for investment bond providers
-
- Figure 8: UK population, by age band, 2009-14
- Inheritances received in later life may also be relevant
- A product aimed predominantly at higher-rate tax payers
-
- Figure 9: Number of basic and higher rate taxpayers, 2000/01-2009/10
- The outlook for PDI and consumer savings looks good
- The stock market rally continues
-
- Figure 10: FTSE 100 and FTSE All Share – daily index movements, January 2002-September 2009
- The base rate remains at an all-time low
-
- Figure 11: Changes in the Bank of England base rate, January 2002-July 2009
Consumer Context
-
- Key points
- Consumer confidence has increased since Q1 2009…
-
- Figure 12: Consumer confidence index, January 1997-December 2009
- … with savings and investment activity rising as a result
-
- Figure 13: Savings, investment, borrowing and debt repayment – consumers’ expected activity, December 2008-December 2009
- Investment in equities is also expected to increase
-
- Figure 14: Intended buy and sell activity of stockmarket-based investments and government/corporate bonds, Q3/Q4 2002-Q4 2008/Q1 2009
Competitive Context
-
- Key points
- Investors are increasingly drawn to collectives…
-
- Figure 15: Retail sales of unit trusts and OEICs by IMA members, 2000-09*
- … with sales of unit trusts and OEICs increasing sharply in 2009
- Equity ISA subscriptions are expected to increase in 2009/10
-
- Figure 16: ISA sales, by type of ISA, 2003/04-2008/09
- Buy-to-let is a popular alternative investment
-
- Figure 17: New buy-to-let mortgage business, 2003-09
SWOT Analysis
-
-
- Figure 18: Investment bonds – SWOT analysis, 2010
-
Who’s Innovating?
-
- Key points
- A mature sector that lacks innovation
- Enhancing the attractiveness of existing propositions
- A number of new products have been launched…
- … including offshore investment bonds…
- … and structured products from banks and building societies
- The RDR is likely to prompt more innovation in the market
Market Size and Forecast
-
- Key points
- Sales of investment bonds have been declining for some time…
-
- Figure 19: Total number of new single-premium investment bond contracts and value of total new premiums, 2004-09
- … with average premiums also having started to fall recently
- Market forecast
- Total new premiums are expected to grow in 2011
-
- Figure 20: Forecast of the total number of new single-premium investment bond contracts and value of total new premiums, 2004-14
- In volume terms, the market will continue to shrink
- Factors used in this forecast
Market Segmentation
-
- Key points
- Bond classifications altered
- Unit-linked bonds are the biggest product category
-
- Figure 21: Proportional distribution of investment bond sales by main product categories, based on total new premiums, 2005-09
- Investors sought safety in 2008 when stock markets were falling
- With-profits bonds became unpopular after the dot com crash
-
- Figure 22: New with-profits bond sales, 2008-09
- Distribution bond sales declined in 2009
-
- Figure 23: New distribution bond sales, 2008-09
- Money market bonds were very popular at the top end in 2008
-
- Figure 24: New money market bond sales, 2008-09
- Unit-linked bonds are a better performing sector of the market
-
- Figure 25: New unit-linked bond sales, 2008-09
- Guaranteed bonds are primarily defensive
-
- Figure 26: New guaranteed bond sales, 2008-09
- Structured products – a replacement for investment bonds?
Market Share
-
- Key points
- AXA/Winterthur overtook Aviva to become the market leader in 2008
-
- Figure 27: Top ten investment bond providers, by new premium income from single-premium life policies, 2006-08
- HSBC saw a massive increase in sales in 2008
-
- Figure 28: Top ten unit-linked bond providers, by new premium income from single-premium unit-linked life policies, 2006-08
- Aviva dominates the with-profits sector
-
- Figure 29: New sales of with-profits bonds, by top five providers, H1 2008-H1 2009
Companies and Products
-
- Aviva (formerly Norwich Union)
- Legal & General
-
- Figure 30: Legal & General: New single premiums gross of reinsurance, 2007-08 and H1 2008-H1 2009
- Standard Life
- Sterling (Zurich)
- AXA
- Prudential
Brand Communication and Promotion
-
- Key points
- Investment bond adspend has fallen over the last four years
-
- Figure 31: Total advertising expenditure on investments, by sub-category, year to September 2006-09
- The top ten advertisers account for 87% of total adspend
-
- Figure 32: Top ten investment bond advertisers, year to September 2006-09
- Providers favour direct mail as their main way of advertising
-
- Figure 33: Advertising expenditure on investment bonds, by media type, year to September 2008-09
Channels to Market
-
- Key points
- Sales of investment bonds are almost exclusively intermediated…
-
- Figure 34: Investment bond distribution mix, based on total new premiums, 2008 and 2009
- …but demand from IFAs fell considerably in 2009
-
- Figure 35: Investment bond distribution mix, by product catregory, based on total new premiums, 2009*
The Consumer: Product Ownership
-
- Key points
- Two thirds of consumers have cash-based savings…
-
- Figure 36: Ownership of savings and investment products, December 2009
- … while just 14% own shares or collective investments…
- … and just 7% have investment bonds
- Many simply can’t afford to take any risks with their cash
-
- Figure 37: Ownership of savings and investment products, by various demographics, December 2009
- Guaranteed bonds are more commonly held by older investors
-
- Figure 38: Ownership of investment bonds, by various demographics, December 2009
- A product for experienced investors
-
- Figure 39: Cross-holdings of different types of savings and investment products, December 2009
- People with investment bonds are more likely to own GEBs
- Most people have just a few different savings/investment products…
-
- Figure 40: Repertoire of the number of different types of savings and investment products owned, December 2009
- … with older and more affluent consumers likely to own more
-
- Figure 41: Repertoire of the number of different types of savings and investment products owned, December 2009
- People with a wide range of products are more likely to own IBs…
-
- Figure 42: Repertoire of the number of different types of savings and investment products owned, by ownership of different types of savings and investment products, December 2009
- … and are likely to be wealthier…
-
- Figure 43: Total value of saving and investments held, by number of saving/investment products held, December 2009
- … and have a much higher risk tolerance
-
- Figure 44: Risk tolerance, by number of different types of savings and investment products owned December 2009
The Consumer – Investible Assets
-
- Key points
- The mass affluent are a very small target market…
-
- Figure 45: Total value of savings and investments held, December 2009
- … with HNW being even smaller, at just 1% of the population
- Men are more likely to be at the top of the wealth scale…
-
- Figure 46: Total value of savings and investments held, December 2009
- The mass affluent are more likely to own investment bonds…
-
- Figure 47: Total value of savings and investments held, by ownership of different types of savings and investment products, December 2009
- …and also tend to have a higher risk tolerance
-
- Figure 48: Total value of savings and investments held, by risk tolerance, December 2009
The Consumer: Risk Tolerance
-
- Key points
- The average UK consumer is extremely risk averse…
-
- Figure 49: Risk tolerance, December 2009
- Risk tolerance declines as people get older
-
- Figure 50: Risk tolerance, by various demographics, December 2009
- ABs are willing to accept a higher level of risk…
- Investment bonds do require a slightly higher risk tolerance
-
- Figure 51: Risk tolerance, by ownership of different types of savings and investment products, December 2009
The Consumer – Attitudes towards Investment
-
- Key points
- A fifth of people only invest in products with guaranteed returns
-
- Figure 52: Attitudes towards longer-term finances, December 2009
- Awareness of investment bonds is extremely low
- ABs are more likely to regularly monitor their investments
-
- Figure 53: Attitudes towards longer-term finances, December 2009
- Older people prefer to invest in products with guaranteed returns
-
- Figure 54: Attitudes towards longer-term finances, December 2009
- ABC1s are more likely to that think now is a good time to invest
- Poor past performance is more of an issue for investment bond holders
-
- Figure 55: Ownership of different types of savings and investment products, by attitudes towards longer-term finances, December 2009
- Wealthy people are more likely to think now is a good time to invest
-
- Figure 56: Total value of savings and investments held, by attitudes towards longer-term finances, December 2009
- Higher-risk investors have negative views on investment bonds
-
- Figure 57: Risk tolerance, by attitudes towards longer-term finances, December 2009
The Consumer – Target Groups
-
- Key points
- How Mintel has created these target groups
- Savvy investors are more likely to own investment bonds…
-
- Figure 58: Ownership of different types of savings and investment products, by target group, December 2009
- … and also have the largest amount of investible assets
-
- Figure 59: Total value of savings and investments held, by target group, December 2009
- Risk Averse Savers are just as the name suggests
-
- Figure 60: Risk tolerance, by target group, December 2009
- Savvy Investors are very clued up when it comes to their finances
-
- Figure 61: Attitudes towards longer-term finances, by target group, December 2009
- The Unengaged are apathetic when it comes to financial planning
- Savvy Investors are likely to be high earners
-
- Figure 62: Target groups, by various demographics, December 2009
Appendix – Internal Market Environment
-
- Treating Customers Fairly
- Retail Distribution Review
- Splitting sales and advice
-
- Figure 63: Proposed regulatory landscape, 2012
- From commission to fees
- Possible extension to non-investment markets
Appendix – The Consumer
-
-
- Figure 64: Ownership of savings and investment products, December 2009
-
- Figure 65: Total value of savings and investments held, December 2009
-
- Figure 66: Risk tolerance, by various demographics, December 2009
-
- Figure 67: Attitudes towards longer-term finances, December 2009
-
- Figure 68: Repertoire of the number of different types of savings and investment products owned, December 2009
-
- Figure 69: Target groups, by various demographics, December 2009
-
Back to top