Table of Contents
Introduction
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- Report scope
- Abbreviations
Executive Summary
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- The market
- Annuity sales dropped by 15% in 2013
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- Figure 1: Forecast of value of annuities sales, 2009-19
- Non-advised sales now dominate the annuities market
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- Figure 2: Value of total annuities policy sales, by sales channel, 2013
- Market factors
- Longer retirements pose challenges for consumers and insurers…
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- Figure 3: Life expectancy at age 65, 1981-2062
- … and increases dependency on workers
- Rock-bottom interest rates make non-pensions savings less attractive…
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- Figure 4: BoE base rate, CPI, RPI monthly changes, January 2009-June 2014
- … but annuity rates are hardly appealing
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- Figure 5: Annuity rates and gilt yields, January 1991-July 2014
- Reforms set to revolutionise the retirement industry
- All retirees to receive free guidance
- Companies, products and innovations
- Aviva is the market leader in annuity sales
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- Figure 6: Market share of top four annuity providers versus rest of annuities market, 2013
- Insurers withdrew from advertising in 2013/14 as uncertainty rose
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- Figure 7: Total adspend on annuities and income drawdown products, 2012-14
- Insurers offer new products in response to the Budget
- The consumer
- A quarter of over-45s will be eligible to buy an annuity
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- Figure 8: Pension and investment product ownership, May 2014
- Three quarters are aware of pension reforms, but only half feel they understand the implications
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- Figure 9: Awareness of changes to pension market announced in 2014 Budget, May 2014
- Less than a quarter of potential annuity customers are planning to buy one
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- Figure 10: Expected retirement income plans, May 2014
- Most people expect to see an IFA about their retirement options
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- Figure 11: Expected sources of retirement information, May 2014
- Core annuity features remain top of most retirees’ wishlist
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- Figure 12: Desired features of retirement income, May 2014
- What we think
Issues and Insights
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- People need to be shown why an annuity may still be their best option
- The facts
- The implications
- Guaranteed guidance must convince straight away, starting online
- The facts
- The implications
Trend Application
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- Be open about death to offer the most suitable product
- Highlight the disappointment of having a small pension fund
- Preparing for retirement starts now!
Market Drivers
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- Key points
- Longer lives are stretching pension provisions
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- Figure 13: Life expectancy at age 65, 1981-2062
- An ageing population will increase dependency on workers
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- Figure 14: Projected proportion of UK population by age bands, 2013-62
- A worrying proportion have little or no pension provision
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- Figure 15: Pension and investment product ownership, May 2014
- Savers continue to suffer low rates
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- Figure 16: BoE base rate, CPI, RPI monthly changes, January 2009-June 2014
- Annuity rates remain low
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- Figure 17: Annuity rates and gilt yields, January 1991-July 2014
Regulatory Environment
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- Key points
- Pension liberalisation promises to revolutionise retirement
- Guidance guarantee to help retirees with new options
Income Drawdown Overview
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- Key points
- Almost 50% growth in income drawdown value
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- Figure 18: Annuities versus income drawdown plans, 2009-13
- External sales still dominate income drawdown plans
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- Figure 19: Share of external and internal sales of annuities and income drawdown plans, 2013
- Nearly nine in ten income drawdown plans are IFA-arranged
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- Figure 20: New income drawdown plans, by sales channel, 2013
SWOT Analysis
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- Figure 21: Annuities market SWOT analysis, August 2014
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Who’s Innovating?
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- Key points
- Partnership offers get-out option with Enhanced Choice
- LV= and Just Retirement launch one-year fixed term annuities
- Fidelity’s Retirement Service offers guidance to new pension freedoms
Market Size and Forecast
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- Key points
- Fall in sales of annuities, with trouble ahead
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- Figure 22: Volume and value of new annuities sales, 2009-13
- Market forecast
- It will take time for annuities sales to recover
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- Figure 23: Forecast of value of annuities sales, 2009-14
- Figure 24: Forecast of value of annuities sales, 2009-14
- Forecast methodology
- Fan chart explanation
Segment Performance
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- Key points
- Most annuities are bought with smaller pension funds
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- Figure 25: Share of annuities sold, by size of pension fund, 2013
- Growth in annuities bought for over £70,000
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- Figure 26: Number of annuities sold, by size of pension fund, 2009-13
- Enhanced policies continue to grow
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- Figure 27: Annuities market segment performance, enhanced annuities by total sales, 2009-13
Market Share
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- Key points
- Aviva is the UK’s largest annuity provider
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- Figure 28: Top 15 providers in the UK annuity market, by premiums, 2011-13
- Top four annuities providers make up over half of the market
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- Figure 29: Market share of top four annuities providers versus rest of annuities market, 2013
Companies and Products
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- Aviva
- Legal & General
- Prudential
- Just Retirement (Avallux Sarl)
- Partnership Assurance (Cinven Ltd)
- Note on companies and products
Brand Communication and Promotion
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- Key points
- Adspend dropped by half in 2013-14
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- Figure 30: Total adspend on annuities and income drawdown products, 2012-14
- Aviva are the biggest spending advertisers in retirement income
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- Figure 31: Top five advertisers of annuities and income drawdown products, 2012-14
- Big drop in press advertising
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- Figure 32: Total adspend on annuities and income drawdown products, by media type, 2012-14
- A note on adspend
Channels to Market
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- Key points
- External annuities reach parity with internal sales
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- Figure 33: Share of external versus internal new annuity sales, 2003-13
- Direct sales dominate the market…
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- Figure 34: Volume of total annuities policy sales, by sales channel, 2013
- … but advised policies are disproportionately valuable
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- Figure 35: Value of total annuities policy sales, by sales channel, 2013
Pension and Investment Product Ownership
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- Key points
- A quarter of over-45s could buy an annuity at retirement
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- Figure 36: Pension and investment product ownership, May 2014
- Men are more likely to have a DC pension than women…
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- Figure 37: Potential annuitants, by gender, May 2014
- …while DC pension ownership grows alongside income
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- Figure 38: Potential annuitants, by household income, May 2014
- Potential annuitants are more likely to engage in other saving products
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- Figure 39: Ownership of non-pension savings, potential annuitants versus all, May 2014
Awareness of Budget Changes
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- Key points
- Only half understand pension liberalisation
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- Figure 40: Awareness of changes to pension market announced in 2014 Budget, May 2014
- Awareness is highest among older consumers
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- Figure 41: Awareness of changes to pension regulations, by age, May 1024
- Higher earners and higher-educated have a greater understanding
- Potential annuitants have better awareness and understanding
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- Figure 42: Awareness of changes to pension regulations, potential annuitants versus all, May 2014
Expected Retirement Income Plans
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- Key points
- Less than a quarter of potential annuitants plan to buy one
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- Figure 43: Expected retirement income plans, May 2014
- Income drawdown could challenge annuities as first-choice for retirees
- Encashment could be as common as standard annuities
- Four in ten are unsure about what they intend to do
Expected Sources of Retirement Income Information
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- Key points
- Most expect to get advice from an IFA
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- Figure 44: Expected sources of retirement income information, May 2014
- Undecided savers are more likely to use an IFA
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- Figure 45: Expected sources of retirement income information, by expected retirement income plans, May 2014
- Only 15% intend to use an independent guidance organisation
- Half of DC pension-holders will use non-professional advice
Desired Features of Retirement Incomes
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- Key points
- Consumers want a reliable income
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- Figure 46: Desired features of a retirement income, May 2014
- Annuity features are still popular among those who plan not to buy one
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- Figure 47: Desired features of retirement income, by expected retirement income plans, May 2014
- Male desire to provide for dependents could boost protected annuities
Appendix – Market Size and Forecast
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- Figure 48: Best- and worst-case forecast of the value of annuities sales, 2014-19
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Appendix – Pension and Investment Product Ownership
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- Figure 49: Pension and investment product ownership, by demographics, May 2014
- Figure 50: Pension and investment product ownership, by demographics, May 2014 (continued)
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- Figure 51: Pension and investment product ownership, by demographics, May 2014 (continued)
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Appendix – Awareness of Budget Changes
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- Figure 52: Awareness of changes to pension market announced in 2014 budget, by demographics, May 2014
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Appendix – Expected Retirement Income Plans
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- Figure 53: Expected retirement income plans, by demographics, May 2014
- Figure 54: Expected retirement income plans, by demographics, May 2014 (continued)
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- Figure 55: Expected retirement income plans, by demographics, May 2014 (continued)
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Appendix – Expected Sources of Retirement Income Information
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- Figure 56: Expected sources of retirement income research, by demographics, May 2014
- Figure 57: Expected sources of retirement income research, by demographics, May 2014 (continued)
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Appendix – Desired Features of Retirement Incomes
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- Figure 58: Desired features of retirement incomes, by demographics, May 2014
- Figure 59: Desired features of retirement incomes, by demographics, May 2014 (continued)
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