Table of Contents
Introduction and Abbreviations
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- Global information and research
- Consumer research
- Abbreviations
Executive Summary
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- Key Market Dynamics
- A difficult few years for pension providers…
- …with a significant impact on the value of new sales
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- Figure 1: Value of new individual pensions business, 1994-2003
- 2002’s market leader falters
- IFAs strengthen their grip on the market
- The state and the employer still dominate consumers’ retirement planning…
- …and many of those who are saving for their retirement are not saving enough
- Reputation is key in a troubled market
- Faith in pensions is falling…
- …but can the industry alone make a difference?
Legislative Background and Definitions
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- A three-tiered pension system
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- Figure 2: Structure of the UK pension system
- State Pension/Second State Pension
- Occupational Schemes
- Personal pensions
- Stakeholder pensions
- Self-invested personal pensions
- Group Personal Pensions
Market Drivers
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- A huge range of issues impact on the pensions market
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- Figure 3: Industry dynamics in the personal pensions market
- Is the UK losing the saving habit?
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- Figure 4: Total PDI, consumer expenditure, savings and the savings ratio, at constant 1998 prices, 1998-2007
- Stockmarket woes present a major challenge to investment providers…
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- Figure 5: Value of the FTSE All Share/FTSE 100 index, 1996-2003
- …but can the markets build on the gains of 2003?
- Interest rates hit cash savers and annuitants, while cutting the cost of borrowing
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- Figure 6: Bank of England base rate, 1992-2003
- An ageing population provides the impetus behind pension reforms…
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- Figure 7: Number of state pensioners, 1981-2002
- …as fewer workers face having to support a greater number of pensioners
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- Figure 8: UK Population growth, by age group, 2001-25
- Trust is still the over-riding issue for providers…
- …but a lack of financial awareness makes rebuilding trust extremely difficult
- The Legislation
- Towards a more balanced savings environment
- Stakeholder pensions just one part of the new framework
- Pension simplification to go ahead in 2005
- The pensions industry recognises the need for reform
- The Competition
- Property the new favourite for many investors…
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- Figure 9: Total sales (SHIP members only), at current and constant 1998 prices, 1998-2003
- …and the buy-to-let market continues to grow
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- Figure 10: Value and volume of new buy-to-let mortgages, 1999-2003
- Clear evidence that the buy-to-let boom presents a major threat to pensions providers…
- …but is this simply a reflection of market conditions?
- New legislation could make property investment an ally, rather than a threat
- ISAs offer tax advantages, along with considerable flexibility
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- Figure 11: ISA sales, 1999/2000-2002/03
- Are we witnessing the death of the traditional company pension?
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- Figure 12: Employees in occupational pension schemes, 1953-2000
- Risk-averse employers and changing working patterns changing the face of company pension provision
- The new environment creates new opportunities for providers…
- …but also new challenges
Market Size
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- Is the pensions market in retreat?
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- Figure 13: New individual pension business, 1994-2003
- An end to the stakeholder effect?
- Standard personal pensions taking a decreasing share of the market
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- Figure 14: Value of new individual pension business by product type*, 1994-2003
- Average contributions to regular premium personal pensions on the up
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- Figure 15: Average contribution to regular premium individual pension schemes, 2002/03
- Single premium SIPP contributions dwarf those of other pension schemes
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- Figure 16: Average contribution to single premium individual pension schemes, 2002/03
- A steady decline in the number of standard personal pension sales
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- Figure 17: New standard personal pension business, 1994-2003
- Can non-stakeholder products profit in today’s market?
- A slow increase in the value of linked pension sales
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- Figure 18: Proportion of linked/non-linked new individual pensions business*, 1994-2003
Key Players
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- Standard Life lead the market…
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- Figure 19: New pensions income, by type of contract, 2002
- …but recent developments will have had a major impact
- Norwich Union to benefit from consolidation in the stakeholder market?
Distribution and Advice
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- IFAs drive the individual pension market
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- Figure 20: Distribution of new individual pensions*, Q1-Q3 2003
- IFAs take an even greater share of the standard personal pensions market
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- Figure 21: Distribution of new standard personal pensions*, Q1-Q3 2003
- How is the 1% world changing relationships between IFAs and pensions providers?
- Future distribution patterns still hugely dependent on the changing regulatory regime
- Meeting the cost of advice
Advertising and Promotion
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- Pension adspend falls, both in absolute and relative terms…
- …responding to market conditions and regulatory uncertainty
- The press is the main advertising outlet for pensions providers
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- Figure 22: Share of pension adspend by outlet, 2003
- Advisers top the list of advertisers
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- Figure 23: Top ten pension advertisers, 2002-03
The Consumer
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- Company and state pensions still provide the cornerstone of many consumers’ retirement planning
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- Figure 24: Pension arrangements, by gender and socio-economic group, January 2004
- 35-44-year-olds – the ‘personal pension generation’?
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- Figure 25: Pension arrangements, by age, January 2004
- Londoners most likely to own a personal pension
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- Figure 26: Pension arrangements, by television region, January 2004
- Starting a family provides an incentive to review pension arrangements…
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- Figure 27: Pension arrangements, by lifestage and marital status, January 2004
- …as consumers realise they must begin to look to the future
- Affluent families key target for personal pension providers
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- Figure 28: Pension arrangements, by Special Group, January 2004
- Can providers reach pension holders through online channels?
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- Figure 29: Pension arrangements, by media usage, January 2004
- Is there a role for the supermarkets in the pensions industry?
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- Figure 30: Pension arrangements, by supermarket usage and commercial television viewing, January 2004
- Clear evidence of the savings gap
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- Figure 31: Monthly pension contributions, by gender, age and socio-economic group, January 2004
- ABs show their worth to the pension provider
- The cost of supporting a family means that there is little scope to set aside money for the future
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- Figure 32: Monthly pension contributions, by lifestage and Special Group, January 2004
- Broadsheet readers make the highest average contributions…
- …but possibilities exist to leverage existing customers through exploiting online opportunities
- Wide variation in contribution levels among different groups of shoppers
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- Figure 33: Monthly pension contributions, by media usage, supermarket usage and commercial television viewing, January 2004
- Scope to increase average contributions through television advertising
- Provider’s reputation remains key
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- Figure 34: Key pension features, by gender and socio-economic group, January 2004
- The role of past performance data in investment selection
- The role of IFAs in the selection process
- Stakeholder ideal for the 25-34-year-olds
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- Figure 35: Key pension features, by age, January 2004
- Employer contributions key to getting younger ABC1s to arrange a pension
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- Figure 36: Key pension features, by lifestage and Special Group, January 2004
- Tailoring the marketing message to the medium
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- Figure 37: Key pension features, by media usage, January 2004
- Provider reputation key for those who watch the most commercial television
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- Figure 38: Key pension features, by supermarket usage and commercial television viewing, January 2004
Consumer Attitudes and Targeting Opportunities
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- Is consumer faith in pensions waning?
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- Figure 39: Attitudes towards pension products, December 2002 and January 2004
- Government approval appears to have had little effect
- Commitment to pensions is strongest among the most affluent
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- Figure 40: Attitudes towards pension products, by gender and socio-economic group, January 2004
- Is the stakeholder reaching its target market?
- Potential for stakeholder sales among younger consumers
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- Figure 41: Attitudes towards pension products, by age, January 2004
- Starting a family prompts consumers to consider their retirement options
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- Figure 42: Attitudes towards pension products, by lifestage and Mintel Special Group, January 2004
- Broadsheet readers aware of both the risks and the rewards offered by personal pensions
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- Figure 43: Attitudes towards pension products, by media usage, January 2004
- Further evidence that television advertising may be of limited use
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- Figure 44: Attitudes towards pension products, by working status and commercial television viewing, January 2004
- Workplace provision – still untested, but a concept that has obvious potential
- Sainsbury’s customers better informed than most
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- Figure 45: Attitudes towards pension products, by supermarket usage, January 2004
- Analysis reveals four key consumer groups
- Men tend to be hotter prospects than women as far as pension providers are concerned
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- Figure 46: Characteristics of key cluster groups, by gender, age and socio-economic group, January 2004
- Marketing to the affluent
- Internet and broadsheet readers potential targets
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- Figure 47: Characteristics of key cluster groups, by media and supermarket usage, January 2004
- Who to target – and who to avoid?
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- Figure 48: CHAID analysis of key cluster groups, January 2004
Industry Views and Issues
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- What is the future for non-stakeholder products?
- What can be done to rebuild trust among nervous investors?
- Distribution – will depolarisation bring in a new era?
- Online sales channels remain unproven
- The potential for workplace marketing
The Future
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- An unsustainable situation
- The stakeholder pension has fallen short of expectations…
- …but depolarisation may provide a boost
- How long will it take to rebuild trust in the industry?
- Recovering markets should provide a boost for providers…
- …but impending legislation should sound a note of caution
- Still scope for greater involvement in the workplace
Forecast
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- Figure 49: Forecast of new individual pension business in the UK, 2003-07
- A tough market for personal pensions
- Factors incorporated
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