Table of Contents
Executive Summary
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- The market
- Drawdown sales continue to significantly outpace annuities
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- Figure 1: Forecast of new retirement income sales – fan chart, 2014-24
- Half of pension pots accessed are fully withdrawn
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- Figure 2: Number of DC pension pots accessed for the first time, by usage, April 2016-March 2018
- Enhanced annuities account for two fifths of new annuity sales
- Auto-enrolment has expanded the target market
- New FCA rules will start to be implemented from autumn 2019
- Companies and brands
- Lack of competition in the annuity market
- More firms competing in the drawdown market
- The consumer
- Two thirds now have a pension
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- Figure 3: Ownership of single and multiple pension pots, June 2019
- Half of over-55s have already accessed their pension savings
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- Figure 4: Proportion of DC pension holders aged 55+ who have accessed pension pot, June 2019
- One in five expect to access pension savings before state pension age
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- Figure 5: When DC pension holders expect to access their pension (under-65s only), June 2019
- Those yet to retire more drawn to concept of an annuity than drawdown
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- Figure 6: Decumulation options likely to consider, June 2019
- At least half are unprepared about how pension pot will be used in retirement
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- Figure 7: Level of planning about use of pension savings in retirement, June 2019
- More than half claim to be very or somewhat confident about managing pension
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- Figure 8: Level of confidence about making decision about pension savings, June 2019
- Uncertainty is the key driver of pension concerns
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- Figure 9: Concerns about the use of pension pot, June 2019
- Control and flexibility are vital but doubts about engagement remain
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- Figure 10: Agreement with statements about pensions and retirement income, June 2019
- What we think
Issues and Insights
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- Pension Freedoms went too far too quickly
- The facts
- The implications
- Most have given up on professional advice just when they need it most
- The facts
- The implications
The Market – What You Need to Know
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- Drawdown sales continue to eclipse annuities
- Half of pension pots accessed are fully withdrawn
- Enhanced annuities now account for two in five new annuity sales
- Half of annuities are sold on the open market
- Auto-enrolment has helped to expand the addressable market
- New FCA rules will come into force in autumn 2019
Market Size and Forecast
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- Drawdown sales continue their impressive growth
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- Figure 11: Volume of new annuity and income drawdown sales, 2014-18
- Drawdown estimated to make up 84% of the market by value
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- Figure 12: Value of new annuity and income drawdown premiums, 2014-18
- Retirement income product sales set to continue rising
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- Figure 13: Forecast of new retirement income sales – fan chart, 2014-24
- Figure 14: Forecast of new retirement income sales – fan chart, 2014-24
- New premiums forecast to reach £43 billion in 2024
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- Figure 15: Forecast of new retirement income premiums – fan chart, 2014-24
- Figure 16: Forecast of new retirement income premiums, 2014-24
- Forecast methodology
Pension Pots Accessed
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- Over half of pension plans accessed are fully withdrawn
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- Figure 17: Number of DC pension pots accessed for the first time, by usage, April 2016-March 2018
- Full withdrawals concentrated among pots valued under £30,000
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- Figure 18: Proportional distribution of pension pots accessed, by pot size and usage, October 2017-March 2018
- Higher number of modest pension pots now entering drawdown
- Most accessing pension are under 65
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- Figure 19: Proportional distribution of pension pots accessed, by customer age and usage, October 2017-March 2018
- £25.6 billion withdrawn from pensions since start of Pension Freedoms
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- Figure 20: Flexible payments from pensions, Q2 2015-Q1 2019
Annuity Market Segmentation
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- Enhanced annuities now account for two fifths of sales
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- Figure 21: Annuity sales, by product type, 2016-18
Channels to Market
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- Half of annuity sales made on the open market
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- Figure 22: Breakdown of annuity and income drawdown sales, by internal and external channels, 2014-18
- Most annuities sold without advice
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- Figure 23: Number of new annuity sales, by channel, 2014-18
- Around half of drawdown business goes via IFAs
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- Figure 24: Number of new drawdown sales, by channel, 2014-18
- Intermediary definitions
Market Drivers
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- In-force DC pension scheme numbers surpass 26 million in 2017
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- Figure 25: Number of individual and group pensions in force and number of occupational DC members, 2013-17
- 10.1 million workers have been auto-enrolled
- Brexit uncertainty continues to supress annuity rates
- Trend of working into old age will boost demand for flexible solutions
Regulatory and Legislative Changes
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- FCA reveals final rules after Retirement Outcomes Review consultation
- ‘Wake-up’ packs
- Annuity information prompt
- More clarity around the cost of drawdown
- FCA sets out Final Rules on Pension Investment Pathways
- Early versions of Pensions Dashboards due to be launched soon
Companies and Brands – What You Need to Know
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- Deficient level of competition in the annuity market
- More competition exists in drawdown market
- Product development focused on flexibility and retirement planning
Key Players and Market Movers
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- Over 50 firms offer retirement income products
- The top annuity providers
- Recent sales figures
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- Figure 26: New annuity business, by the largest providers, 2018
- There are just six providers offering annuities on the open market
- More companies are active in the income drawdown market
Competitive Strategies and Innovation
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- Control and flexibility are key drivers for product development
- Just Group launches flexible annuity called Secure Lifetime Income
- Smart Pension and L&G unveil prototype of retirement income solution
- Canada Life launches Diversified Monthly Income Fund
- AJ Bell introduces two income funds
- Automation expected to improve access to personalised advice
The Consumer – What You Need to Know
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- Two thirds now have a pension
- Most plan to access DC pension at state pension age or later
- Annuities more likely to be considered as an option than drawdown
- At least half are unprepared about use of pension pot in retirement
- Uncertainty is the key driver of pension concerns
- Control and flexibility are key but questions about engagement remain
Pension Ownership and Access
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- Most full-time workers own a pension
- Many savers hold multiple pension pots
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- Figure 27: Ownership of single and multiple pension pots, June 2019
- More people say they have a DB pension than a DC one
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- Figure 28: Type of pension owned, by number of pension pots, June 2019
- Nearly half of DC pension holders have multiple pots
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- Figure 29: Proportion of pension savers with a single pot versus two or more pots, by type of pension, June 2019
- Half of over-55s have accessed their pension savings
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- Figure 30: Proportion of DC pension holders aged 55+ who have accessed pension pot, June 2019
Age Expecting to Access Pension
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- Most expect to access DC savings at state pension age or later
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- Figure 31: When DC pension holders expect to access their pension (under-65s only), June 2019
- A notable minority plan to delay access after state pension age
Decumulation Options Likely to Consider
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- Annuities remain more appealing than drawdown
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- Figure 32: Decumulation options likely to consider, June 2019
- Partial cash withdrawal still the single most likely option considered
- Pension Freedoms mean people have the option to vary their approach
Planning for Use of Pension in Retirement
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- Half yet to consider or unsure about use of pension pots in retirement
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- Figure 33: Level of planning about use of pension savings in retirement, June 2019
- Many a decade or less away from state retirement are unprepared
- 55% are confident about managing their pension
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- Figure 34: Level of confidence about making decision about pension savings, June 2019
Concerns about Use of Pensions in Retirement
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- Uncertainty is the key driver of pension concerns
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- Figure 35: Concerns about the use of pension pot, June 2019
- Most have multiple concerns
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- Figure 36: Repertoire analysis on concerns about the use of pension pot, June 2019
- Figure 37: Concerns about the use of pension pot, by number of concerns held, June 2019
- Few are concerned about access to professional advice
- Failing to improve access to advice regulators have shifted their focus
Attitudes and Expectations about Retirement Income
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- A secure income for life is what everybody wants…
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- Figure 38: Agreement with statements about pensions and retirement income, June 2019
- …but control and flexibility are also top priorities
- One in five admit that planning for retirement isn’t a priority for them
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Consumer research methodology
Appendix – Market Size and Forecast
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- Total market forecasts – best- and worst-case scenarios
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- Figure 39: Forecast of new retirement income sales – best- and worst-case scenarios, 2019-24
- Figure 40: Forecast of new retirement income premiums – best- and worst-case scenarios, 2019-24
- Forecast methodology
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