Table of Contents
Executive Summary
-
- The market
- Annuity sales and premiums have decreased dramatically
-
- Figure 1: New annuities contracts and premiums, 2011-15
- Income drawdown market is the winner from pension freedoms
- Brexit adds more uncertainty for those planning to retire
- Pension auto-enrolment rumbles on
- Lifetime ISA set to challenge traditional pensions
- Companies and brands
- Aviva is the top annuities provider for now
-
- Figure 2: Market share of top five annuity providers and others in the market (excluding bulk and deferred annuities), 2015
- Prudential withdraws from the opening annuities market
- Defined benefit de-risking popularity
- Popularity of hybrid and blended products set to increase
- FCA takes a keen interest in robo- advice
- The consumer
- Nearly two thirds of over-45s have a pension product
-
- Figure 3: Pension ownership, June 2016
- Passive attitude towards pension savings
-
- Figure 4: Consumer agreement with statements regarding their pension, June 2016
- Under half understand pension reform changes
-
- Figure 5: Consumer awareness of pension freedoms, June 2016
- A third intend to take their tax free lump sum
-
- Figure 6: Consumers plans to withdraw pensions cash, June 2016
- Adding pensions cash to savings is most likely outcome from pension withdrawals
-
- Figure 7: Consumer plans for spending pensions cash withdrawals, June 2016
- What we think
Issues and Insights
-
- Consumers take a conservative approach to pension withdrawals
- The facts
- The implications
- Pension Wise popularity has increased, but need for tailored advice will see growth in robo-advice
- The facts
- The implications
The Market – What You Need to Know
-
- Annuity sales and premiums have decreased dramatically
- Income drawdown market is the winner from pension freedoms
- Annuity internal sales increase again
- Brexit impacts annuities appeal
- Pension auto-enrolment rumbles on
Annuities – Market Size and Forecast
-
- Individual annuity sales plummeted further in 2015
-
- Figure 8: New individual annuity contracts and premiums, 2011-15
- Annuity premiums also down but by a smaller percentage
-
- Figure 9: Proportion of pension annuities sold by size of fund, 2010-15
- Brexit vote further undermines appeal of annuities
- Annuities to continue decline
-
- Figure 10: Forecast of the value of new annuity sales, 2011-21
- Figure 11: Total forecast value of new annuities, 2011-21
- Forecast methodology
Income Drawdown – Market Size and Forecast
-
-
- Figure 12: New income drawdown contracts and premiums, 2011-15
- FCA data shows income drawdown sales have surpassed annuity sales
-
- Figure 13: Income drawdown – Number of sales and premium amount 2013-15
- Income drawdown popularity to increase after Brexit vote
- Income drawdown market growth set to continue
-
- Figure 14: Forecast of the value of new income drawdown sales, 2011- 21
- Figure 15: Total forecast value of new income drawdown plans, 2011-21
- Forecast methodology
-
Market Segmentation
-
- Enhanced annuities market share is steadily increasing
-
- Figure 16: Lifetime and enhanced annuities volumes and market share, 2011-15
- Uncrystallised fund pension lump sum withdrawals prove unpopular
-
- Figure 17: Options taken by people accessing pension pot for the first time in Oct-Dec 2015
- Full encashment popular among those that have smaller pots
-
- Figure 18: Number of pots fully withdrawn, by size of pot Oct- Dec 2015
Channels to Market
-
- Overall increase in independent advice sales …
-
- Figure 19: Volume of new annuities and income drawdown sales (combined), by method of purchase, 2014-15
- … but there has been a reduction in independent advice Income drawdown sales
-
- Figure 20: Volume of new income drawdown sales, by sales channel, 2014-15
- Internal sales have increased again
-
- Figure 21: Internal and external annuity sales, 2011-15
-
- Figure 22: Internal and external income drawdown sales, 2015
Market Drivers
-
- Ageing population will present a problem for the state
-
- Figure 23: UK population projection, by age band, 2016-56
- Life expectancy continues to increase
-
- Figure 24: Projected life expectancy at 65, by gender, 1981-2064
- Flat rate pension come in to force
- DC ownership surpasses DB for the first time
-
- Figure 25: Active members of private sector occupational pension schemes, 2004-14
- Annuity rates continue to fall
Regulatory and Legislative Changes
-
- Second hand annuity market
- Pension Wise and the Pension Advisory Service to be merged
- Financial Advice Market Review/Budget 2016
- Prototype pensions dashboard due by 2017
- Auto-enrolment nears completion
- Lifetime ISA release on the horizon
- Robo-advice department at FCA gets the green light
- Mandatory annuity comparison tool could be introduced
Companies and Products – What You Need to Know
-
- Aviva is the top annuities provider for now
- Prudential withdraws from the opening annuities market
- Defined benefit de-risking popularity
- Popularity of hybrid and blended products set to increase
- FCA takes a keen interest in robo-advice
Market Share – Annuities
-
- Aviva leads the way in individual annuities market
-
- Figure 26: Annuity sales by UK providers (excluding bulk and deferred annuities), 2015
-
- Figure 27: Market share of top five annuity providers and others in the market (excluding bulk and deferred annuities), 2015
- A note on income drawdown market share
Competitive Strategies
-
- Just Retirement merges with Partnership
- Prudential withdraws from open annuity market
- Royal London offers free drawdown governance service
- Define benefit de-risking and bulk annuity underwriting becomes more popular
- Hybrid and blended products offer an alternative …
- … but some providers have already withdrawn their products
- Aviva launches face-to- face advice service
- Robo-advice to offer alternative to those with smaller pension pots
The Consumer – What You Need to Know
-
- Nearly two thirds of over-45s have a pension product
- Passive attitude towards pension savings
- Under half understand pension reform changes
- A third intend to take their pension as a tax free lump sum
- Adding pensions cash to savings is most likely outcome from pension withdrawals
Consumer Ownership of Pension Products
-
- Almost two thirds own a pension product …
-
- Figure 28: Pension ownership, June 2016
- … but the gender divide still exists
-
- Figure 29: Pension ownership, by gender, June 2016
- Those who are parents of children 18+ are less likely to own a pension product
- Almost two fifths own a pension freedom eligible product
Consumer Attitudes towards Retirement Income Planning
-
- Passive attitude towards retirement income planning
-
- Figure 30: Consumer agreement with statements regarding their pension, June 2016
- Over half of consumers do not have a target for retirement
Awareness of Pension Freedoms
-
- Under half understand the effects on pension freedoms
-
- Figure 31: Consumer awareness of pension freedoms, June 2016
- Similar level of knowledge among those that own DB or DC pensions
-
- Figure 32: Consumer understanding of pension reform, by pension ownership, June 2016
-
- Figure 33: Consumer awareness of pension freedoms, by household income, June 2016
Consumer Plans for Pension Fund Cash Withdrawals
-
- Consumers take a conservative approach to cash withdrawals
-
- Figure 34: Consumers plans to withdraw pensions cash, June 2016
- Adding money to savings is important to over-45s
-
- Figure 35: Consumer plans for spending pensions cash withdrawals, June 2016
- Just over a quarter intend to use cash lump sum to pay debts
- Travel providers are likely to benefit from pension reforms
Consumer Plans for Pension Funds
-
- Third of consumers are unsure what they intend to do with their remaining pension pot
-
- Figure 36: Consumer plans for pension fund at retirement, June 2016
- Almost a fifth of consumers intend to keep their money invested in their pension pot
- Similar levels of interest for both income drawdown and annuities
Desired Features of Retirement Income Products
-
- Majority of over-45s want a predictable income
-
- Figure 37: Consumers’ desired features of retirement income products
- Hybrid products could provide the blend of products consumers want
- Advisers to see a resurgence in popularity
- Looking after family is also a concern for many
-
- Figure 38: Consumers’ desired features of retirement income, by gender, June 2016
- Annuities in everything but name
-
- Figure 39: Consumers’ plans for pension fund at retirement, by consumers’ desired features of retirement income, June 2016
Consumer Attitudes towards Advice
-
- Pension freedoms do not seem to have had the desired affect
-
- Figure 40: Sources of advice consumer expect to use, June 2016
- Free advice from Government bodies is most popular source of advice
- Many conduct their own research
-
- Figure 41: Sources of advice consumers expect to use, by awareness of pension freedoms, June 2016
Appendix – Data Sources, Abbreviations and Supporting Information
-
- Abbreviations
- Consumer research methodology
Appendix – Market Size and Forecast
-
-
- Figure 42: Forecast of the total value of annuities and income drawdown sales, 2011-21
- Forecast methodology
-
Back to top