Table of Contents
Executive Summary
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- The market
- Auto-enrolment drives new premium growth
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- Figure 1: Forecast of new insurer-administered trust-based pension premiums – Fan chart, 2011-21
- Figure 2: Forecast of new group pension premiums – Fan chart, 2011-21
- Most workplace pension products are distributed by intermediaries
- Employers show a strong preference for multi-employer DC schemes
- Auto-enrolment ramps up
- New Pensions Bill announced to strengthen protection in the master trust sector…
- …and introduce a cap on early exit fees
- Financial Advice Market Review offers recommendations to help close consumer advice gap
- Companies and brands
- Standard Life, Scottish Widows and Aviva are among the leading pension providers
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- Figure 3: Main participants in the workplace pension market and how they interrelate, 2016
- The insurance-administered sector is heavily consolidated
- There are over 70 master trusts in the UK…
- …some of which have recently introduced new fees to employers
- Bulk buyout market attracts new entrants
- The consumer
- Auto-enrolment continues to increase pension ownership
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- Figure 4: Proportion of employees enrolled in a workplace pension, by sector/size of employer, April 2016
- Opt out rates are highest among employees of small firms
- Just over a fifth of private sector workers do not know what type of pension they have
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- Figure 5: Type of pension enrolled in, by sector/size of employer, April 2016
- Most pension holders could tolerate paying in more to their pension
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- Figure 6: Employee contribution rate – current rate versus maximum rate could tolerate, April 2016
- Room to improve employer communications
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- Figure 7: Level of satisfaction with employer communications regarding pension, April 2016
- Just 50% of DC pension holders know what charges apply
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- Figure 8: Employee understanding of key aspects of pension scheme – DC pension savers only, April 2016
- Overall satisfaction level is fairly high – but there’s still room for improvement
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- Figure 9: Employee satisfaction with workplace pension and employer contributions, April 2016
- What we think
Issues and Insights
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- Scope to increase employee contributions – on average by two percentage points
- The facts
- The implications
- Help employers improve their communications with enrolled staff
- The facts
- The implications
The Market – What You Need to Know
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- Auto-enrolment drives new premium growth
- Most new pension sales are generated by advisers
- GPPs and master trusts are the products of choice for employers
- Intensely busy period for providers and advisers ahead
- Government announces new Pensions Bill
Market Size and Forecast – Trust-based Schemes
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- TIPs and bulk buyouts account for most new trust-based business…
- …however the data excludes some notable master trust business
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- Figure 10: New insurer-administered trust-based pension business (volume and value), 2011-15
- Slower growth forecast
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- Figure 11: Forecast of new insurer-administered trust-based pension premiums – Fan chart, 2011-21
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- Figure 12: Forecast of new insurer-administered trust-based pension business, 2016-21
- Forecast methodology
Market Size and Forecast – Contract-based Pensions
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- New group pension sales have grown strongly over the past five years
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- Figure 13: New group pension business (volume and value), 2011-15
- Premium income is predicted to rise strongly over the next few years, before experiencing a slowdown from 2020
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- Figure 14: Forecast of new group pension premiums – Fan chart, 2011-21
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- Figure 15: Forecast of new group pension business, 2016-21
- Forecast methodology
Channels to Market
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- The workplace pension market is heavily intermediated…
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- Figure 16: Proportional distribution of new regular-premium insurer-administered trust-based and group pension business, by sales channel, 2014-15
- …although a significant proportion of trust-based premiums are generated through direct channels
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- Figure 17: Proportional distribution of total new single-premium insurer-administered trust-based and group pension business, by sales channel, 2014-15
- Types of intermediary and their role in the pension market
Trends in Workplace Pension Ownership
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- Auto-enrolment has boosted pension participation in the workplace
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- Figure 18: Proportion of employees with workplace pensions, 1997-2015
- Growth is being driven by the DC sector
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- Figure 19: Breakdown of employees with workplace pensions, by sector and type of pension, 2015
Market Drivers
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- Auto-enrolment has dramatically increased the size of DC pension pool
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- Figure 20: Number of insurer-administered occupational pension scheme members and group pension policies in force, 2010-14
- Most employers are using DC master trusts and group pensions to meet new duties
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- Figure 21: Pension scheme types and number of auto-enrolled eligible jobholders declared by employers, as at 31 March 2015
- 6.2 million workers had been auto-enrolled by April 2016
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- Figure 22: Declarations of compliance, April 2016
- Opt-out rates increase as smaller firms stage
- Intensely busy period ahead for pension providers and advisers
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- Figure 23: Staging profile – number of employers subject to full duties, 2014/15-2017/18
Regulatory and Legislative Changes
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- As auto-enrolment ramps up, insurance providers struggle to meet demand
- Master trusts help fill the supply gap, raising concerns about a lack of consumer protection in the sector
- New Pensions Bill will address concerns…
- …and introduce a cap on early exit fees
- New pension freedoms prompt need for greater consumer access to advice
Companies and Brands – What You Need to Know
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- Standard Life, Scottish Widows and Aviva are the leading pension providers
- The insurance-administered sector is heavily consolidated
- There are more than 70 master trusts in the UK…
- …some of which have introduced new fees to employers
- Bulk buyout market attracts new entrants
Market Structure and Key Players
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- Employer duties
- Pension supply and administration
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- Figure 24: Main participants in the workplace pension market and how they interrelate, 2016
- Investment management
- The rise of master trusts
Provider Rankings & Market Share
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- Just over half of all insurance-administered trust-based premiums in 2014 were generated by five providers…
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- Figure 25: Rankings of top 20 providers of insurance-administered trust-based occupational pension business, by gross premiums, 2014
- …the individual and group contract-based business is even more consolidated
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- Figure 26: Rankings of top 20 providers of insurance-administered individual and group contract-based pension business, by gross premiums, 2014
Competitive Strategies
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- De-risking market developments
- Continued growth in bulk buyout market as more employers look to reduce pension liabilities…
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- Figure 27: In-force bulk buyout business, 2011-14
- …prompting more insurers to enter
- Product news
- Providers take pre-emptive action and reduce or remove early exit fees
- Two of the largest master trusts introduce fees for smaller employers
- Technological innovation
- Helping pension savers understand their choices at retirement
- Aviva unveils 10-minute ‘quote and apply’ system for corporate advisers
Advertising and Marketing Activity
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- Providers spend very little on above-the-line consumer advertising channels
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- Figure 28: Total above-the line, online display and direct mail advertising expenditure on pension products and advice, 2011/12-2015/16
- Most pension adspend relates to TV and press advertising
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- Figure 29: Distribution of above-the line, online display and direct mail advertising expenditure on pension products and advice, by media type, 2011/12-2015/16
- Providers make increasing use of social media to reach target audience
- Government agencies represent nearly half the sector’s adspend
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- Figure 30: Top 15 above-the line, online display and direct mail advertisers of pension products and advice, 2014/15-2015/16
- Nielsen Ad Intel coverage
The Consumer – What You Need to Know
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- Auto-enrolment continues to increase pension ownership
- Opt out rates are highest among employees of small firms
- Just over a fifth of private sector workers do not know what type of pension they have
- Most pension holders could tolerate paying in more to their pension
- Room to improve employer communications
- Just 50% of DC pension holders know what charges apply
Size and Sector of Employer
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- 22% of employees work for small private-sector firms
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- Figure 31: Sector and size of employer worked for, April 2016
- A small proportion of employees work for two or more different types of employer
- Many small businesses are expected to impose pay cuts and freezes
Pension Enrolment
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- Two thirds of employees are enrolled in a workplace pension
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- Figure 32: Proportion of employees enrolled in a workplace pension, by sector/size of employer, April 2016
- Opt-out rates are noticeably higher among employees of small and medium-sized firms
- Auto-enrolment is helping to close the gender gap
Type of Workplace Pension
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- A large proportion of private-sector workers are confused about what type of pension they have
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- Figure 33: Type of pension enrolled in, by sector/size of employer, April 2016
Employee Contribution Rate
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- Most workplace pension savers are contributing more than the current minimum
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- Figure 34: Employee contribution rate, April 2016
- Possible confusion over percentage of gross pay versus qualifying earnings
- Nearly one in four workplace pension holders are contributing less than 4%
- A significant minority do not know what level they are contributing
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- Figure 35: Employee contribution rate, by type of pension, April 2016
- Average contribution rate is broadly the same for private sector employees whether they work for a small, medium or large firm
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- Figure 36: Employee contribution rate, by sector/size of employer, April 2016
- The average workplace pension saver could tolerate their contribution rate increasing by no more than two percentage points
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- Figure 37: Employee contribution rate – current rate versus maximum rate could tolerate, April 2016
- Only a very small proportion of existing DC pension savers say they could not stomach their contribution rate rising to 4%
Satisfaction with Employer Communications
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- 15% of workplace pension holders rate their employer communications as ‘poor’ or ‘very poor’
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- Figure 38: Level of satisfaction with employer communications regarding pension, by sector/size of employer, April 2016
- 57% of workplace pension holders have access to a helpline…
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- Figure 39: Employee access to pension advice and to pension scheme online, April 2016
- …and 40% can make changes to their pension online
- Employees value having good access to pensions information and advice
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- Figure 40: Employee access to pension advice and to pension scheme online, by level of satisfaction with employer communications, April 2016
Level of Understanding and Overall Satisfaction with Scheme
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- Significant scope to improve consumer education
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- Figure 41: Employee understanding of key aspects of pension scheme, April 2016
- Just half of all DC pension savers know what charges and fees they are paying
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- Figure 42: Employee understanding of key aspects of pension scheme, April 2016
- Around one in seven are dissatisfied with their workplace pension
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- Figure 43: Employee satisfaction with workplace pension and employer contributions, April 2016
Appendix – Data Sources, Abbreviations and Supporting Information
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- Framework for workplace pensions
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- Figure 44: Framework for workplace pensions – Private sector, 2016
- Occupational schemes
- Contract-based workplace pensions
- Scheme type
- Defined-benefit (salary-related) schemes
- Defined-contribution (money-purchase) schemes
- Other relevant definitions
- Abbreviations
- Consumer research methodology
Appendix – Market Size and Forecast
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- Trust-based sector forecast – best- and worst-case scenarios
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- Figure 45: Forecast of new insurer-administered trust-based pension premiums – best- and worst-case scenarios, at current prices, 2016-21
- Contract-based sector forecast – best- and worst-case scenarios
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- Figure 46: Forecast of new group pension business – best- and worst-case scenarios, at current prices, 2016-21
- Forecast Methodology
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