Table of Contents
Executive Summary
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- The market
- Regular premiums grew by 20% in 2015
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- Figure 1: New personal pension and individual stakeholder pension business, 2011-15
- But regulatory change inhibits personal pension contributions
- Personal pensions compete with ISAs…
- …and SIPPs grow in popularity
- Majority of personal pensions sold via independent advisers
- Companies and brands
- Lloyds Banking Group retains biggest market share
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- Figure 2: Ranking of individual pension providers – UK, by GWP relating to total individual pension business*, 2013 and 2014
- Investment in digital
- Scrapping early exit fees
- The consumer
- 15% of non-retirees have a personal pension
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- Figure 3: Pension product ownership, December 2015
- Affordability is the biggest barrier to personal pension savings
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- Figure 4: Barriers to owning or contributing to a personal pension, December 2015
- Nearly a fifth of personal pension holders prefer to save or invest elsewhere
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- Figure 5: Attitudes towards personal pensions and saving for retirement, December 2015
- Online information most commonly used source
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- Figure 6: Expected sources of information about personal pensions, December 2015
- Changing pension rules is undermining saving for retirement
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- Figure 7: Attitudes towards pensions and saving for retirement, December 2015
- What we think
Issues and Insights
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- Reliance on familial advice offers a route to pension conversations
- The facts
- The implications
- Workplace pensions scheme moves responsibility for saving enough away from consumers
- The facts
- The implications
- Affordability will still inhibit take-up of robo-advice
- The facts
- The implications
The Market – What You Need to Know
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- Regular personal pension premiums increase by 20%
- Pension freedoms reverse downward trend in premium contributions
- Lifetime ISA will provide competition to personal pensions
- SIPP volumes grow
- Majority of personal pensions sold via independent advisers
Market Size and Forecast
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- Significant increase in regular and premium business
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- Figure 8: New personal pension and individual stakeholder pension business, 2011-15
- Over two thirds of new business are transfers
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- Figure 9: Transfers as a share of new personal and individual stakeholder business, 2011-15
- Market forecast
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- Figure 10: Forecast for new regular personal pension and individual stakeholder pension premiums, 2015-20
- Figure 11: Forecast for new regular personal pension and individual stakeholder pension premiums, 2015-20
- Forecast methodology
Market Drivers
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- Auto-enrolment brings focus to pensions…
- …but pensions compete with ISAs for contributions
- Spenders rather than savers
- Earnings growth increases ability to save
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- Figure 12: Consumer price index and average weekly earnings growth, 2011-16
- SIPPs appeal to a wider audience
Regulatory and Legislative Developments
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- Pension freedoms reverse downward trend
- New Lifetime ISA will compete with personal pensions…
- …but many would be better off continuing to save in a pension
- Pension tax relief reform on hold – for now
- Financial Advice Market Review
- Making advice more affordable
- Improving communications with consumers
- Early exit charge limits
- Wider regulatory changes on the horizon
Channels to Market
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- Regulation has affected the availability of advice…
- …but the FAMR outlines plans to tackle the issue
- Majority of personal pensions sold via independent advisers
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- Figure 13: New personal pension business, by sales channel, 2014-15
- Figure 14: New individual stakeholder pension business, by sales channel, 2014-15
Key Players – What You Need to Know
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- Lloyds retains biggest market share
- Investing in digital services
- Scrapping exit fees
- Adspend increases dramatically due to government activity
Market Share
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- Top five represent two thirds of all pension business
- Lloyds Banking Group maintains top position
- Consolidation yet to be reflected in the rankings
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- Figure 15: Ranking of individual pension providers – UK, by GWP relating to total individual pension business*, 2013 and 2014
Competitive Strategies
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- Investment in digital
- Robo-advice platforms
- At-retirement advice
- Scrapping early exit fees
- Minimum contribution amounts
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- Figure 16: Minimum contribution amounts, for selected providers, March 2016
- Busy period for mergers and acquisitions
- Aviva buys Friends Life
- L&G sells Suffolk Life
- Swiss RE buys Guardian Financial Services
- Old Mutual splitting business into four areas
Advertising and Marketing Activity
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- Overall pension adspend nearly doubles in 2015…
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- Figure 17: Total above-the line, online display and direct mail advertising expenditure on pensions, 2011-15
- …but personal pension adspend remains a small proportion of overall total
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- Figure 18: Total advertising expenditure on pension and retirement income products, by sub-category, 2011-15
- DWP tops list of advertisers
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- Figure 19: Top 10 advertisers of pension products (excluding retirement income products), 2013-15
- Nielsen Media Research coverage
The Consumer – What You Need to Know
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- 57% of non-retirees own a pension
- Affordability inhibits personal pension ownership
- Over-45s prefer a conservative approach to pensions
- Younger consumers prefer informal sources of information
- Pensions seen as difficult to understand
Pension Ownership
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- 57% of non-retirees own a pension…
- …but two in five have no pension savings
- Personal pension ownership is falling
- Interest in SIPPs is rising
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- Figure 20: Pension product ownership, December 2015
- Self-employed are more likely to own a personal pension
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- Figure 21: Pension product ownership, by employment type, December 2015
- Traditional gender roles affect personal pension ownership
- 59% of personal pension holders are regular contributors
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- Figure 22: Regular contribution to personal pension, December 2015
Barriers to Personal Pension Ownership
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- Workplace pensions biggest barrier to personal pension contributions
- Self-employed are less likely to be able to afford to save
- More people seeing the benefits of property development
- Millennials need access to education on pensions
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- Figure 23: Barriers to personal pension ownership, December 2015
- 18-24s are more likely to be in a position to save
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- Figure 24: Age, by financial situation, December 2015
- Personal pension contributions inhibited by lack of earnings
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- Figure 25: Agreement with the statement ‘I don’t earn enough to contribute to a personal pension’, by pension ownership, December 2015
Attitudes of Personal Pension Holders
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- Personal pension holders prefer a conservative approach
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- Figure 26: Attitudes towards personal pensions and saving for retirement, December 2015
- Nearly a fifth prefer to save or invest elsewhere
- A fifth are interested in managing their own investments
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- Figure 27: Attitudes towards personal pensions and saving for retirement, December 2015
Expected Sources of Information for Personal Pensions
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- Online sources and IFAs rank highly
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- Figure 28: Expected source of information for personal pensions, December 2015
- Wealthier households value the advice given by IFAs
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- Figure 29: Expected source of information for personal pensions, by household income, December 2015
- Younger people prefer more informal advice
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- Figure 30: Expected use of family and friends as a source of information, by age, December 2015
- Partner with employers to offer professional advice
- Using one source of information is enough
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- Figure 31: Expected source of information for personal pensions – Repertoire – December 2015
Attitudes towards Pensions and Saving for Retirement
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- Confusion around pensions needs to be addressed
- Education and tracking tools could boost engagement
- Frequent changes disrupt retirement planning
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- Figure 32: Attitudes towards pensions and saving for retirement, December 2015
- Online offers an alternative to professional F2F advice
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- Figure 33: Expected source of information for personal pensions, by agreement with the statement ‘It is worth paying for professional advice about pensions’, December 2015
- Parents see the worth in professional advice
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- Figure 34: Attitudes to pensions and saving for retirement – CHAID – Tree output, December 2015
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Consumer research methodology
- CHAID Methodology
Appendix – Market Size and Forecast
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- Market forecast
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- Figure 35: Forecast for new regular personal pension and individual stakeholder pension premiums, 2015-20
- Forecast methodology
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