Table of Contents
Executive Summary
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- The market
- Sales of annuities fell by half in 2014
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- Figure 1: Forecast of the value of new annuity sales, 2010-20
- Key players
- Just Retirement leads a concentrated market
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- Figure 2: UK annuity market share, by share of gross written premiums, 2014
- The consumer
- 19% have a DC pension, and ownership is growing
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- Figure 3: Pension and investment product ownership, May 2015
- Understanding of pension freedoms is encouraging
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- Figure 4: Awareness of pension freedoms, May 2015
- Income drawdown is the top pick for arranging retirement income
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- Figure 5: Expected plans for use of pension funds to provide a retirement income, May 2015
- Savings and investments are the most popular use of withdrawn funds
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- Figure 6: Expected use of pension freedoms cash, May 2015
- 17% expect to use Pension Wise
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- Figure 7: Sources expected to be used to get retirement income information, May 2015
- People still want guaranteed incomes
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- Figure 8: Desired features of retirement income, May 2015
- What we think
Issues and Insights
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- Personalised online tools can help plug the advice gap
- The facts
- The implications
- Freedoms cash plans are more cautious than feared
- The facts
- The implications
- Hybrid products seem perfect, but have their own challenges
- The facts
- The implications
The Market – What You Need to Know
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- Sales of annuities fell by half in 2014
- Retirement income is an increasingly important social issue
- Internal and non-advised sales rise
- Boom in income drawdown sales
Market Size and Forecast
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- Budget reforms cut annuity sales in half in 2014
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- Figure 9: Volume and value of new annuity sales, 2010-15
- Market forecast
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- Figure 10: Forecast of the value of new annuity sales, 2010-20
Market Drivers
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- Pension freedoms take effect
- Longer retirements should make guaranteed incomes more attractive…
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- Figure 11: Actual and projected life expectancies at 65, by gender, 1981-2062
- …but not until rates improve
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- Figure 12: Annuity rates and gilt yields, January 1991-June 2015
- Increased dependency ratio will strain state support
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- Figure 13: Projected proportion of UK population, by age bands, 2014-62
- Delayed state pensions put more focus on personal responsibility
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- Figure 14: Projected dates for full transitions to increased state pension ages, by gender
- Auto-enrolment is changing the pensions industry forever
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- Figure 15: Pension provisions of UK workers, by type of pension, 2005-14
- Those with smaller funds have deserted annuities quickest
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- Figure 16: Share of new annuity sales, by value of pension fund, 2004-14
Channels to Market
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- First rise in internal sales since 2007
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- Figure 17: Share of internal versus external new annuity sales, 2004-14
- Small drop in advised sales
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- Figure 18: Volume of total annuities policy sales, by sales channel, 2013 versus 2014
- Figure 19: Value of total annuities policy sales, by sales channel, 2013 versus 2014
Income Drawdown Overview
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- Huge rise in income drawdown
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- Figure 20: Annuities versus income drawdown plans, 2010-14
- Non-advised drawdown platforms make gains
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- Figure 21: Volume of new income drawdown contracts, by sales channel, 2013 versus 2014
- Figure 22: Value of new income drawdown contracts, by sales channel, 2013 versus 2014
Key Players – What You Need to Know
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- Just Retirement leads a concentrated market
- Companies find their place in a new market
Market Share
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- Just Retirement is the UK’s largest annuity provider…
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- Figure 23: Top 15 providers in the UK annuity market, by premiums, 2012-14
- …but the market remains heavily concentrated
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- Figure 24: Market share of top five annuity providers versus rest of annuities market, 2014
Competitive Strategies
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- Advertising spending has been slashed
- ‘Third way’ products set to boom
- Focus on service
- Adspend data coverage
The Consumer – What You Need to Know
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- 19% have a DC pension, and ownership is growing
- Understanding of pension freedoms is encouraging
- Income drawdown is the top pick for arranging retirement income
- Savings and investments are the most popular use of withdrawn funds
- 17% expect to use Pension Wise
- People still want guaranteed incomes
Pension Ownership
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- 37% are in the potential annuities market…
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- Figure 25: Pension and investment product ownership, May 2015
- …but inequalities remain
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- Figure 26: Potential annuitants, by gender, employment status and annual household income, May 2015
- Most have one or two savings products
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- Figure 27: Repertoire of pension and investment product ownership, May 2015
- Potential annuitants are the most likely to also save outside pensions
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- Figure 28: Ownership of any non-pensions savings and investments product, by pension ownership, May 2015
Awareness of Pension Freedoms
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- 82% have some awareness of pension freedoms…
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- Figure 29: Awareness of pension freedoms, May 2015
- …up 7 percentage points from 2014
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- Figure 30: Awareness of pension freedoms, May 2014 versus May 2015
- Understanding is higher among those nearer to retirement…
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- Figure 31: Agreement with the statement “I am aware of the change and have at least some understanding of what it means”, by age, May 2015
- …and those affected by freedoms
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- Figure 32: Awareness of pension freedoms, by pension ownership, May 2015
Expected Retirement Income Plans
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- Income drawdown is the most popular retirement income plan…
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- Figure 33: Expected plans for use of pension funds to provide a retirement income, May 2015
- …while just 18% still expect to get an annuity
- Only 5% plan to take all their pension as a lump sum
Use of Pension Freedoms Cash
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- Half plan to invest pensions withdrawals…
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- Figure 34: Expected use of pension freedoms cash, May 2015
- …while a fifth look to clear debts
- Travel and retail markets set to benefit
- 11% plan to give a ‘living inheritance’
Expected Sources of Retirement Income Information
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- 17% plan to use Pension Wise
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- Figure 35: Sources expected to be used to get retirement income information, May 2015
- Half expect to pay for advice…
- …while non-pensions savers are most likely to use an IFA
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- Figure 36: Expected sources of retirement income information, by non-pensions saving ownership, May 2015
- A third will research online
Desired Features of Retirement Income
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- An annuity in all but name
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- Figure 37: Desired features of retirement income, May 2015
- Prospective income drawdown customers still want a reliable income
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- Figure 38: Desire for a reliable retirement income, by expected retirement income plans, May 2015
- Higher earners are more concerned with securing a life-long income
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- Figure 39: Desire for a retirement that features “An income that is guaranteed to pay out for the rest of my life”, by annual household income, May 2015
Appendix – Market Size and Forecast
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- Figure 40: Best- and worst-case forecast of the value of new annuity sales, 2015-20
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Appendix – Abbreviations
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- Abbreviations
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