Table of Contents
Introduction
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- Abbreviations
Executive Summary
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- The market
- Declining levels of new regular-premium business
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- Figure 1: Forecast of new personal and individual stakeholder pension business (regular premiums only) – fan chart, 2006-16
- Reduction in transfer business has also led to a fall in single-premium business
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- Figure 2: New personal and individual stakeholder pension business – regular and single premiums, 2007-11
- Increasing competition from the group sector
- Market factors
- Current economic environment is not conducive to long-term saving
- Declining pensions participation
- Major pension reform on the way
- Companies, brands and innovation
- Product innovation
- Leading players in the market
- IFAs generate the lion’s share of sales
- Minimal above-the-line advertising
- The consumer
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- Figure 3: Retirement provision, January 2012
- Stakeholder pensions are still much less popular than traditional personal pensions
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- Figure 4: Ownership of pensions, by type, January 2012
- Around a third of personal and stakeholder pension savers are not making any pension contributions
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- Figure 5: Level of monthly contributions – by personal and stakeholder pension savers, January 2012
- Nearly a quarter of personal pension savers reduced or stopped their contributions in 2011
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- Figure 6: Level of agreement with statements about pension contribution activity and performance monitoring, January 2012
- Many people are failing to give retirement saving the priority it deserves
- What we think
Issues in the Market
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- What proportion of British adults are saving in a private pension?
- And what type of pension do they have?
- What effect will NEST have on the personal pension sector?
- Who will the new reforms benefit?
- What impact will NEST have on the pension intermediary market?
Future Opportunities
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- Pensions need to be ‘meaningful’ to be truly valued
- Engage customers through more interactive modes of communication
Internal Market Environment
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- Key points
- Key issues affecting the pensions industry
- Individual pension business in force has been in decline…
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- Figure 7: Size of the DC pension pool, 2003-10
- …but the DC pool will get a welcome boost with the introduction of NEST
- NEST will impose a 1.8% contribution charge on members
- Investment strategy will be determined by a predetermined retirement date
- Impact on existing pension arrangements
- A third of IFAs are worried about NEST impact on personal pension business
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- Figure 8: Biggest challenges facing pension intermediaries, 2009-11
Broader Market Environment
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- Key points
- Summary of the main macroeconomic indicators impacting on the consumer credit market
- Household savings level falls, reflecting a drop in real wage growth
- No imminent prospect of a base rate rise
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- Figure 9: Average annual changes in the Bank of England base rate, CPI and RPI – UK, 2003-12
- Stockmarket volatility is a constant risk for pension savers…
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- Figure 10: FTSE 100 and FTSE All-Share – daily index movements, January 2003-December 2011
- …fuelling the need for pension products that offer multi-asset fund choice
Competitive Context
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- Key points
- Alternative retirement funding strategies
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- Figure 11: Summary of retirement funding strategies, 2011
- Figure 12: Attitudes towards investing in property versus stocks and shares and pensions, January 2012
- Strong rise in GPP sales over the past two years…
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- Figure 13: Number of new individual pension contracts (including GPPs), by type of product, 2007-11
- …boosting premium income
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- Figure 14: Value of new individual pension business (including GPPs), by premium, 2007-11
- New occupational DC pension saw a strong uplift in premium income in 2011
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- Figure 15: New insurer-administered DC occupational pension business (volume and value), 2007-11
Market SWOT Analysis
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- Figure 16: Personal and stakeholder pensions – SWOT analysis, 2012
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Who’s Innovating?
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- Key points
- In this market, regulatory change provides the catalyst for innovation
- Standard Life launches online direct personal pension
- Most development activity is currently centred on the GPP market…
- …as well as on enhancing platform technology
- Platform pensions predicted to become commonplace
Market Size and Forecast
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- Key points
- Decline in new premiums continues
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- Figure 17: New personal pension and individual stakeholder pension business, 2007-11
- Transfers account for more than two thirds of new single premiums
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- Figure 18: Transfers as a share of new personal and individual stakeholder pension business, 2007-11
- Personal pension forecast
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- Figure 19: Forecast of new personal and individual stakeholder pension business (regular premiums only) – fan chart, 2006-16
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- Figure 20: Forecast of new regular-premium personal pension and individual stakeholder pension business, 2007-16
- Forecast methodology
- Fan chart explanation
Market Share
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- Key points
- Aviva reclaimed the top spot in 2010
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- Figure 21: Ranking of individual pension providers – UK, by GWP relating to total individual pension and income drawdown business, 2009 and 2010
Companies and Products
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- Aviva
- Lloyds Banking Group
- Standard Life
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- Figure 22: Key financial data for Standard Life, Q1-Q3 2010 AND 2011
- Figure 23: Key financial data for Standard Life, 2009 and 2010
- AEGON
- Old Mutual
Brand Communication and Promotion
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- Key points
- The Holy Grail of a trusted brand
- Pension providers target their advertising more at advisers than the end customer
- Pension providers and advisers visibly cut back on advertising…
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- Figure 24: Total advertising expenditure on pension products and services (excluding annuities), 2007-11
- …although adspend on annuities increased over the same period
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- Figure 25: Total advertising expenditure on pension and retirement income product, by sub-category, 2007-11
- Aviva uses TV advertising to enhance its brand presence in the retirement saving arena
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- Figure 26: Top five advertisers of pension products and services, 2009-11
Channels to Market
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- Key points
- IFAs increase their share of the personal pension market in 2011
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- Figure 27: New personal pension business, by sales channel, 2007-11
- Tied agents play a greater role in the stakeholder pension market
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- Figure 28: New individual stakeholder pension business, by sales channel, 2007-11
Pension Ownership and Retirement Provision
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- Key points
- Survey background
- A large share of the adult population have limited or no pension savings
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- Figure 29: Private pension provision, January 2012
- Workplace pension reforms likely reduce personal pension participation
- Many people have accumulated benefits in more than one type of pension
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- Figure 30: Private pension provision, by type of saver (cross-analysis), January 2012
- Greater job mobility has led to many people owning several pension pots
- Gender gap will narrow with the advent of NEST
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- Figure 31: Private pension provision, by gender and working status, January 2012
- Private pension ownership increases with age
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- Figure 32: Private pension provision, by age, January 2012
- Employment status and personal wealth are major determiners in pension take-up
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- Figure 33: Private pension provision, by highest rate of income tax paid, January 2012
Level of Personal Pension Contributions
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- Key points
- Almost a third of personal pension savers are currently not making any contributions
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- Figure 34: Level of monthly contributions, by type of personal pension owned, January 2012
- Contribution rates fall with age
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- Figure 35: Level of monthly contributions to a personal pension or GPP, by gender and age, January 2012
- Self-employed should be saving more
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- Figure 36: Level of monthly contributions to a personal pension or GPP, by working status, January 2012
Pension Monitoring and Saving Activity
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- Key points
- Most personal pension savers fail to consult an IFA for pensions advice
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- Figure 37: Level of agreement with statements about pension contribution activity and performance monitoring, January 2012
- Nearly one in four personal pension savers have stopped or reduced their contributions in the past year
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- Figure 38: Agreement with statements about pension contribution activity and performance monitoring, by type of personal pension owned, January 2012
- The more people contribute to their pension, the more ‘engaged’ they are
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- Figure 39: Agreement with statements about pension contribution activity and performance monitoring, by level of monthly contribution, January 2012
Priority Given to Retirement Saving
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- Key points
- Many non-retired adults consider saving for their retirement a low priority…
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- Figure 40: Level of priority given to retirement saving, by gender and age, January 2012
- …but those who have a pension are more likely to consider it a high priority
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- Figure 41: Level of priority given to retirement saving, by type of personal pension owned, January 2012
- Only around a quarter of non-retired adults are confident they are saving enough for their retirement
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- Figure 42: Confidence in amount being saving towards retirement, by gender and age, January 2012
- The more people contribute, the more confident they feel
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- Figure 43: Confidence in amount being saving towards retirement, by level of monthly contribution (personal pension savers only), January 2012
Appendix – Product Definitions and Market Background
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- Product types and definitions
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- Figure 44: Types of private pension provision in the UK, January 2012
- Personal pension design and retirement income options
- Recent milestones in pension reform
Appendix – Market Forecast
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- Best and worst case scenario forecast
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- Figure 45: Forecast of new personal and individual stakeholder pension business (regular premiums only) Best and worst case scenario, 2011-16
Appendix – Pension Ownership by Demographics
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- Figure 46: Pension ownership, by product type and demographics, January 2012
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Appendix – Profile of Personal Pension Savers
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- Figure 47: Demographic profile of personal pension savers versus total non-retired sample, January 2012
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Appendix - Level of Personal Pension Contributions
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- Figure 48: Level of personal pension contributions, by demographics, January 2012
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Appendix – Pension Monitoring and Saving Activity
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- Figure 49: Agreement with statement ‘I always read/review my annual pension statement’, by demographics, January 2012
- Figure 50: Agreement with statements ‘When I need advice about my pension arrangements I consult an independent financial adviser’, January 2012
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- Figure 51: Agreement with statements ‘I regularly monitor the performance of my underlying pension funds’, by demographics, January 2012
- Figure 52: Agreement with statement ’Within the past year I’ve reduced or stopped my pension contributions’, by demographics, January 2012
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- Figure 53: Agreement with statement ‘I might have to reduce or stop my pension contributions soon, in order to reduce my expenditure’, by demographics, January 2012
- Figure 54: Agreement with statement ‘I plan to restart or increase my pension contributions within the coming year’, by demographics, January 2012
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Appendix – Priority Given to Retirement Saving
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- Figure 55: Level of priority given to retirement saving, by demographics, January 2012
- Figure 56: Confidence in amount being saving towards retirement, by demographics, January 2012
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