Table of Contents
Issues in the Market
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- Key Issues
- Abbreviations
Future Opportunities
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- We’re preparing… are you?
- Financial Fitness – Get the balance right
Market in Brief
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- Distribution overview
- Market size
- Individual and group pensions
- Annuities and income drawdown
- Market segmentation by intermediary
- Individual and group pensions
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- Figure 1: New APE* premiums into individual pensions, by type of pension and distribution channel, 2010 (est)
- Annuities and income drawdown
- Number of directly authorised intermediaries is declining
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- Figure 2: Number of directly authorised retail intermediary firms, by sector (primary category), 2007-10
- Generating new business likely to remain difficult despite recovery
- Unawareness, apathy and confusion holding market back
- Auto-enrolment both a threat and an opportunity
- Phased approach to retirement gaining momentum
- An increasingly burdensome regulatory environment for advice firms
- Some changes in legislation have added more flexibility for consumers
- Brand communication and promotion
- Key IFA research survey results
- Biggest challenges facing pension intermediaries
- Client advice and expectations
- Prospects and future business intentions
- Opinions on regulation and personal accounts
Internal Market Environment
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- Key points
- Availability and quality of occupational pension schemes has diminished
- More private savings will be needed to fill the gap
- Phased approach to retirement a growing trend
- Apathy, unawareness and confusion holding back the market
- Launch of NEST should be welcomed by adviser community
- It is now more important for consumers to shop around for an annuity
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- Figure 3: External versus internal volume sales of new pension annuities – proportional distribution, 2000-09
- Advisers could benefit from greater take-up of the OMO
- PICA advocates mandatory shopping around
Regulatory Environment
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- Key points
- RDR requirements will be difficult for some advice firms to cope with
- Majority of consumers say they are unwilling to pay for advice
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- Figure 4: Amount people are prepared to pay up front for independent financial advice, February 2010
- Capital adequacy requirements set to increase from 2013
- Major changes to the RDR unlikely
- Just 2% of all FOS complaints are about IFAs
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- Figure 5: Financial services firms complained about, by sector, 2006/07-2009/10
- FSA plans to raise FOS compensation limit to £150,000 by 2012
- Tax relief clawback will hurt pension demand among affluent
- Compulsory annuitisation will come to an end in April 2011
- State pension age set to rise
- Default retirement age to be repealed
Broader Market Environment
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- Key points
- Path to economic recovery expected to be difficult for many
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- Figure 6: Total GDP, at current prices, 2006-13
- Consumers now more focused on saving
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- Figure 7: PDI, consumer expenditure and savings, at current prices, 2005-15
- Increasing longevity altering how people manage retirement savings
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- Figure 8: Cohort life expectancy at age 60, by gender, 1981-2058
- Many already working beyond the official retirement age
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- Figure 9: Breakdown in gross pensioner income (weekly average at 2008/09 prices), 1996/97-2008/09
- Stock markets have recovered but are still highly volatile
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- Figure 10: FTSE 100 and FTSE All-Share – daily index movements, November 2004-November 2010
- Inflation and rising taxes could see more money go into pensions
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- Figure 11: Monthly changes in the rate of annual inflation* and Bank of England base rate – UK, December 2007-December 2010
SWOT Analysis
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- Figure 12: Market for pension-related advice – SWOT analysis, 2011
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Who’s Innovating?
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- Key points
- Google helping IFAs develop an online presence
- Sesame Bankhall Group’s IFA school
- Providing RDR support to advisers
- Honister Capital’s Techlink Professional Service
- Low value annuity referral services
- ‘Non-advised’ annuity outsourcing desk from Tenent
- Sesame Bankhall Group launched an annuity referral service
The Intermediary Marketplace
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- Key points
- 7% decline in the number of directly authorised intermediaries in 2010
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- Figure 13: Number of directly authorised retail intermediary firms, by sector (primary category), 2007-10
- Sharp rise in the number of non-primary category financial advice firms
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- Figure 14: Number of financial advice ARs and DA intermediary firms, by type, 2007-10
Distribution Overview
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- Key points
- Majority of new personal pension business IFA-generated
- EBCs and group pension sales
- Just under nine in ten new individual pensions sold through IFAs in 2010
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- Figure 15: Proportional distribution of new individual pension APE* premiums, by distribution channel, 2006-10
- IFAs less influential in the sale of pension annuities
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- Figure 16: Proportional distribution of new pension annuity APE* premiums, by sales channel, 2006-10
- IFAs behind the large majority of new income drawdown business
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- Figure 17: Proportional distribution of new income drawdown APE* premiums, by sales channel, 2006-10
- Individual pension distribution – detailed breakdown
- Personal Pensions – IFAs regain lost ground
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- Figure 18: Proportional distribution of new personal pension APE* premiums, by distribution channel, 2006-10
- IFAs sold over 90% of group personal pensions in 2010
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- Figure 19: Proportional distribution of new group personal pension APE* premiums, by distribution channel, 2006-10
- IFAs and tied agents split individual stakeholder distribution
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- Figure 20: Proportional distribution of new individual stakeholder pension APE* premiums, by distribution channel, 2006-10
- IFAs dominate company-sponsored stakeholder pensions distribution
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- Figure 21: Proportional distribution of new company-sponsored stakeholder pension APE* premiums, by distribution channel, 2006-10
- New SIPP business mostly IFA-led
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- Figure 22: Proportional distribution of new SIPP APE* premiums, by distribution channel, 2006-10
Market Size – Individual and Group Pensions
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- Key points
- GPP and SIPP new business levels rise in 2010
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- Figure 23: New individual pension premiums, by product type, 2005-10
- Modest rise in single-premium transfer business in 2010
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- Figure 24: Single-premium transfer business, 2006-10
- In-force policy numbers and regular contributions decline
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- Figure 25: Total number of policies and regular premiums from individual pensions business in force, by pension type, 2004-09
Market Segmentation by Type of Intermediary – Individual and Group Pensions
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- Key points
- Market segmentation overview
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- Figure 26: New APE* premiums into individual pensions, by type of pension and distribution channel, 2010 (est)
- IFAs increase new APE business premiums by 25% to £4 billion
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- Figure 27: Value of new premiums sold through independent intermediaries, by type of premium and pension, 2005-10
- Tied agents’ share of APE new business premiums declines by a third
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- Figure 28: Value of new premiums sold through single-tie agents, by type of premium and pension, 2005-10
- Strong rise in the value of GPP business sold via bancassurance
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- Figure 29: Value of new premiums sold through bancassurance, by type of premium and pension, 2005-10
- Direct new business premiums up by more than a quarter
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- Figure 30: Value of non-intermediated new premiums, by type of premium and pension, 2005-10
Market Size – Annuities and Income Drawdown
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- Key points
- Annuity new business slows down while income drawdown accelerates
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- Figure 31: Size of the pension annuities market versus the income drawdown market – new business, 2005-10^
Market Segmentation by Type of Intermediary – Annuities and Income Drawdown
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- Key points
- The value of new annuity business increases across all channels
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- Figure 32: Value of new pension annuity premiums, by sales channel, 2005-10^
- IFAs the only channel to grow new income drawdown premiums
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- Figure 33: Value of new income drawdown premiums, by sales channel, 2005-10^
Key Players
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- The Tenet Group
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- Figure 34: Financial performance of Tenet Group Limited, 2008 and 2009
- Honister Capital
- Sesame Bankhall Group
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- Figure 35: Financial performance of Sesame Bankhall Group Limited, 2008 and 2009
- Positive Solutions (Financial Services)
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- Figure 36: Financial performance of Positive Solutions (Financial Services) Limited, 2008 and 2009
- Alexander Forbes Financial Services
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- Figure 37: Financial performance of Alexander Forbes Financial Services Ltd, 2009 and 2010
- Openwork
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- Figure 38: Financial performance of Openwork Limited, 2008 and 2009
Brand Communication and Promotion
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- Key points
- Advertising financial advice to consumers
- Overall financial advice adspend down by 25% in 2010
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- Figure 39: Overview of total adspend on financial advice services, 2008-10*
- St James’s Place top advertiser of financial advice
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- Figure 40: Top ten advertisers of financial advice services, 2008-10*
- Most advertising goes through direct mail and press
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- Figure 41: Overview of media type used to advertise financial advice services, 2010*
- Advertising pension and annuity products to intermediaries
- Pension adspend rises while annuity spend continues to decline
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- Figure 42: Adspend to the pension and annuity intermediary sector, 2008-10*
- Aviva and Fidelity top advertisers to pension intermediaries
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- Figure 43: Top ten advertisers to the pension intermediary sector, 2008-10
- Partnership Assurance top advertiser of annuities to intermediaries
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- Figure 44: Advertisers to the annuity intermediary sector, 2008-10
The IFA: Biggest Challenges Facing Pension Intermediaries
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- Key points
- FSA over-regulation now seen as the biggest challenge for IFAs
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- Figure 45: Biggest challenges facing pension intermediaries, 2009 and 2010
The IFA: Client Advice and Expectations
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- Key points
- IFAs continue to believe generating new business will be challenging…
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- Figure 46: IFA expectations of how current economic climate will impact new pension business, 2009 and 2010
- …but are more positive about maintaining existing client business levels
- Collectives continue to be the most recommend product
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- Figure 47: Where IFAs are recommending their clients invest their money, 2009 and 2010
The IFA: Prospects and Future Business Intentions
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- Key points
- Rising confidence about business prospects has come to an end
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- Figure 48: Confidence about own business prospects compared to six months prior, Q4 2009 and Q4 2010
- Shifting to recurring income the key IFA priority for 2011
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- Figure 49: Key business intentions over the next 12 months, Q4 2009 and Q4 2010
The IFA: Opinions on Regulation and Personal Accounts
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- Key points
- Close to 46% believe RDR will have negative or very negative impact
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- Figure 50: Opinions on the impact of the Retail Distribution Review on IFA business, Q4 2009 and Q4 2010
- Most IFAs think the TCF initiative will have no impact
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- Figure 51: Opinions on the impact of the Treating Customers Fairly initiative on IFA business, Q4 2009 and Q4 2010
- Money Guidance viewed as irrelevant for majority of IFAs
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- Figure 52: Opinions on the impact of the FSA’s Money Guidance initiative on IFA business, Q4 2009 and Q4 2010
- One in five IFAs believe Personal Accounts will have a positive impact
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- Figure 53: Opinions on the impact of the 2012 introduction of Personal Accounts on IFA business, Q4 2009 and Q4 2010
Appendix – Broader Market Environment
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- Figure 54: Trends and projections in the UK population (‘000s), by age group, 2005-15
- Figure 55: Projected UK economic activity, by gender and age, 2005-15
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