Table of Contents
Introduction
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- Abbreviations
Executive Summary
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- Pension ownership in the UK
- Just over two fifths of those in employment say they have a workplace pension
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- Figure 1: Pension ownership, overall vs among those who are employed, July 2012
- The decline of active private sector pension membership
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- Figure 2: Number of active members of private sector occupational schemes (open and closed) – UK, by size and benefit structure, 2010
- Overview of pension auto-enrolment
- NEST and other low-cost providers enter the market
- Market factors
- Living longer enhances the need for retirement savings
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- Figure 3: Life expectancy at age 65, by gender,1981-2059
- Most consumers have not picked up the slack from the decline in pension provision
- The consumer
- Most think their finances are healthy or OK
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- Figure 4: Current financial situation, July 2012
- Nearly two thirds of non-retired adults haven’t heard of auto-enrolment
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- Figure 5: Awareness of pension auto-enrolment, July 2012
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- Figure 6: Likelihood of opting out of pension auto-enrolment, July 2012
- Reasons for opting out – a lack of affordability and trust
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- Figure 7: Reasons for opting out of pension auto-enrolment, by likelihood of opting out, July 2012
- Attitudes towards the concept of pension auto-enrolment – most in favour
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- Figure 8: Agreement with statements about the concept of pension auto-enrolment, July 2012
- Attitudes towards contributing to a pension – assurances wanted
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- Figure 9: Agreement with statements about contributing to a workplace pension, July 2012
- What we think
Issues in the Market
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- Who wins with auto-enrolment?
- What is the main issue for people who are likely to opt out?
- How can employees be encouraged to contribute more themselves?
- Can IFAs benefit from the introduction of auto-enrolment?
Trend Application
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- Visualise your future retirement today
- A lifelong approach to financial heath
- The pivotal role of the employer
Market Drivers
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- Key points
- Increasing longevity intensifies the need for retirement savings
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- Figure 10: Life expectancy at age 65, by gender, 1981-2059
- Active private sector pension membership has been in steady decline
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- Figure 11: Number of active occupational pension scheme members, pensions in payment and preserved entitlements – UK, by sector, 2006-10
- Figure 12: Number of active members of private sector occupational schemes (open and closed) – UK, by size and benefit structure, 2010
- The failure of stakeholder pensions to stem the tide
- The lack of independent savings highlights the need for auto-enrolment
- Intended pension savings turns up but still below long-term average
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- Figure 13: Intended life, pensions* and ISA activity, Q3/Q4 2002-Q1/Q2 2012
- Instant access makes ISAs the preferred savings and investment product
SWOT Analysis
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- Figure 14: Auto-enrolment – SWOT analysis, 2012
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Overview of Pension Auto-Enrolment
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- Key points
- Pension auto-enrolment in brief
- The basics and who qualifies
- Minimum contribution levels
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- Figure 15: Minimum auto-enrolment employer and employee contribution levels, by date of enforcement
- Staging dates
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- Figure 16: Auto-enrolment staging dates, by PAYE scheme size
- Auto-enrolment and eligibility for means-testing benefits
Auto-Enrolment and Pension Providers
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- Key points
- NEST and other low-cost propositions
- NEST
- Other key facts and charges
- B&CE – The People’s Pension
- Other key facts and charges
- NOW: Pensions
- Other key facts and charges
- The positives and negatives for existing providers
Auto-Enrolment –Employers and IFAs
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- Key points
- Auto-enrolment’s impact on employers
- Two fifths of employers have yet to develop a strategy to deal with costs
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- Figure 17: How employers plan to deal with increased costs related to auto-enrolment, March 2012
- The potential challenges of enforcing auto-enrolment
- 40% of new members opt-out of auto-enrolment at RBS
- A third of IFAs are concerned about personal pension business prospects
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- Figure 18: Biggest challenges facing pension intermediaries, 2009-11
- Opportunities for IFAs in the employer benefits arena
Pension Market Overview
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- Key points
- Workplace pensions
- Across the board growth in new insurer-administered occupational pension business
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- Figure 19: New insurer-administered occupational pension business, by volume and value, 2005-11
- Auto-enrolment will help boost new business levels
- The shift to a DC dominated market
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- Figure 20: Insurer-administered occupational pension business in force, 2006-10
- GPP market has benefited from greater interest from large employers
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- Figure 21: New GPP business, 2005-11
- Flexibility a key attraction of GPPs
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- Figure 22: Group personal pension business in force, 2006-10
- Personal and individual stakeholder pensions
- New premiums continue to fall
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- Figure 23: New personal pension and individual stakeholder pension business, 2007-11
Consumer Financial Confidence
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- Key points
- Most believe their finances are healthy or OK
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- Figure 24: Current financial situation, July 2012
- Financial confidence over the next year – most concerned but expect to manage
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- Figure 25: Financial confidence, July 2009-12
- The mood of caution is a window of opportunity
Pension Ownership
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- Key points
- Just over two fifths of those in employment have a workplace pension
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- Figure 26: Pension ownership, by type of employment, July 2012
- Expansion of pension ownership needed among nearly all age groups
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- Figure 27: Pension ownership, by gender and age, July 2012
- Pension ownership among lower-earners highlights the need for reform
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- Figure 28: Pension ownership, by gross annual household income, July 2012
Awareness of Auto-Enrolment
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- Key points
- Nearly two thirds of non-retired adults haven’t heard of auto-enrolment
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- Figure 29: Awareness of pension auto-enrolment, July 2012
- Above-average level of awareness among full-time employees
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- Figure 30: Awareness of pension auto-enrolment, by working status, July 2012
- Older generation has the highest level of awareness
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- Figure 31: Awareness of pension auto-enrolment, by age, July 2012
- Affluent more likely to be aware
- Spreading awareness may require a more targeted approach
Likelihood of Opting Out
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- Key points
- Only a small minority say they would definitely opt-out
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- Figure 32: Likelihood of opting out of pension auto-enrolment, July 2012
- Self-employed and part-time workers more likely to say they will opt out
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- Figure 33: Likelihood of opting out of pension auto-enrolment, July 2012
- Those aged between 20 and 34 most likely to remain enrolled
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- Figure 34: Likelihood of opting out of pension auto-enrolment, by gender and age, July 2012
- Over-45s most likely to say they will definitely opt-out
- Gross annual household income and likelihood of opting out
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- Figure 35: Likelihood of opting out of pension auto-enrolment, by gross annual household income, July 2012
Reasons for Opting Out
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- Key points
- A lack of funds the top overall reason for opting out
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- Figure 36: Reasons for opting out of pension auto-enrolment, by likelihood of opting out, July 2012
- Trust a central issue for those most likely to opt out
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- Figure 37: Percentage of people who say they would opt out because of distrust of government or pensions, by age, July 2012
- Rebuilding trust will be a challenge…
- … but will be essential to preventing mass opt-outs
Attitudes Towards the Concept of Pension Auto-Enrolment
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- Key points
- Three fifths think auto-enrolment is a good idea
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- Figure 38: Consumer attitudes toward the concept of auto-enrolment, July 2012
- Positive attitudes of younger generation an opportunity not to be wasted
- Two fifths worry auto-enrolment will affect their pay
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- Figure 39: Consumer attitudes toward the concept of auto-enrolment, July 2012
- Who’s most concerned?
Attitudes Towards Contributing to a Workplace Pension
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- Key points
- A strong desire for certainty
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- Figure 40: Attitudes towards auto-enrolment, July 2012
- There are no guarantees but there are plenty of benefits
- Lower wage earners and over-45s will require more guidance
- Employer contributions a key attraction
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- Figure 41: Attitudes towards auto-enrolment - contributions, July 2012
- Less overall enthusiasm about employee contributions
- Highlighting the benefits of individual contributions
- Offering limited early access an option worth considering
Appendix – Pension Ownership
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- Figure 42: Pension ownership, by demographics, July 2012
- Figure 43: Pension ownership, by demographics continued, July 2012
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- Figure 44: Pension ownership, by demographics continued, July 2012
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Appendix – Awareness of Auto-Enrolment
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- Figure 45: Awareness of pension auto-enrolment, by pension ownership, July 2012
- Figure 46: Awareness of auto-enrolment, by demographics, July 2012
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Appendix – Likelihood of Opting-out
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- Figure 47: Likelihood of opting out of auto-enrolment, by demographics, July 2012
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Appendix – Reasons for Opting Out
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- Figure 48: Reasons for opting out, by demographics, July 2012
- Figure 49: Reasons for opting out, by demographics (continued), July 2012
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Appendix – Attitudes Towards the Concept of Auto-Enrolment
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- Figure 50: Agreement with the statements ‘It sounds like a good idea’ and ‘I just don’t trust pension schemes, no matter who is offering them’, by demographics, July 2012
- Figure 51: Agreement with the statements ‘It probably will not apply to me as my employer already offers a good pension’ and ‘I am worried that if my employer is forced to contribute to a pension it will affect my chances of a pay rise, or that there will be cutbacks’, by demographics, July 2012
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- Figure 52: Agreement with the statement ‘Pension regulations change so much that I just can’t keep track of them’, by demographics, July 2012
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Appendix – Attitudes Towards Contributing to a Workplace Pension
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- Figure 53: Agreement with the statements ‘I like the idea of making employers contribute’ and ‘I could probably afford to pay more than 4% of my salary into it’, by demographics, July 2012
- Figure 54: Agreement with the statements ‘I would like to have the option of paying less than 4% of my salary’ and ‘I would be happy to pay into the scheme if it provided a guaranteed minimum pension when I retire’, by demographics, July 2012
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- Figure 55: Agreement with the statements ‘I need assurances that I would be better off paying into it’ and ‘I would like to speak to a pensions adviser about this scheme before it is introduced’, by demographics, July 2012
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