UK Workplace Pensions Market Report 2020
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Report Summary
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Providing the most comprehensive and up-to-date information and analysis of the Workplace Pensions: Incl Impact of COVID-19 – UK market, and the behaviours, preferences and habits of the consumer.
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What are the key challenges facing the industry? Who is the consumer and what do they want? Where are the opportunities, where are the risks and what lies ahead?
Covered in this report
65% of workplace pension holders are confident that they have all the information they need about their pension. This apparent confidence, though, is undermined by the fact that 44% say they do not even know how much of their salary they are contributing to it. Auto-enrolment has been a huge success in expanding membership of workplace pensions but more needs to be done now to improve engagement and understanding to maximise the benefits of this success.
Expert analysis from a specialist in the field
Written by Richard Shepherd, a leading analyst in the Financial Services sector, his extensive knowledge delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.
COVID-19 will negatively impact workplace pension contributions and fund values in 2020. However, as jobs return during the recovery, auto-enrolment will see lost pension savers quickly return. Beyond COVID-19, improving understanding of and engagement with workplace pensions are key challenges to ensure the best outcomes for pension savers at retirement
Richard Shepherd
Associate Director – Financial Services
Table of Contents
-
Overview
- Key issues covered in this Report
- Products covered in this Report
- Trust-based pensions
- Contract-based pensions
- COVID-19: market context
- Economic and other assumptions
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Executive Summary
- The market
- Short-, medium- and long-term impact on the industry
- Figure 1: Expected impact of COVID-19 on workplace pensions, short, medium and long term, 31 July 2020
- New premiums are forecast to fall by a quarter in 2020
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- Figure 2: Forecast of value of new insurer-administered workplace pension business (APE), 2015-25
- 77% of employees are enrolled in a workplace pension
- COVID-19 has hit contributions and fund values
- Figure 3: Annual unemployment rate (forecast), 2007-24
- Reviews focus on value for money and protection for savers
- Companies and brands
- NEST is the biggest workplace pension provider
- Ethical and eco-friendly investing becomes a mainstream concern
- Above-the-line adspend fell to £12.2 million in 2019/20
- Figure 4: Total above-the-line, online display and direct mail advertising expenditure on pension products* and advice, 2015/16-2019/20
- The consumer
- Three quarters of employees are enrolled in a workplace pension
- Figure 5: Workplace pension enrolment, April 2020
- Significant confusion around pension types
- Figure 6: Type of workplace pension enrolled in, by employment sector, April 2020
- Almost half don’t know how much they are contributing to their pension
- Figure 7: Workplace pension contributions, April 2020
- High satisfaction with regularity of pension updates
- Figure 8: Attitudes towards workplace pension communications and investments, April 2020
- Confidence in pensions understanding may be seriously misplaced
- Figure 9: Consumers’ understanding of their workplace pension, April 2020
- Investment strategies must consider planned retirement dates
- Figure 10: Consumer attitudes towards workplace pensions, April 2020
- What we think
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Impact of COVID-19 on Workplace Pensions
- How COVID-19 is reshaping the market
- Job losses and furloughing will dent contributions this year
- The crisis has highlighted the need for greater education and engagement
- The impact of COVID-19 on consumers
- No early signs of a COVID-19 rise in opt-out rates…
- …but concerns over fund performance could change retirement plans
- A boost in saving activity could benefit pensions
- ESG investing remains a growing area of consumer concern
- How brands are responding to COVID-19
- Pension firms are highlighting the threat of COVID-19-related scams
- Scottish Widows reiterates the value of increased flexibility in accessing funds
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Issues and Insights
- COVID-19 raises the need for pensions engagement and understanding
- The facts
- The implications
- The pension membership gender gap has closed but inequalities remain
- The facts
- The implications
- ESG investing is hitting the mainstream
- The facts
- The implications
-
The Market – What You Need to Know
- New premiums are forecast to fall by a quarter in 2020
- 77% of employees are enrolled in a workplace pension
- COVID-19 has hit contributions and fund values
- Reviews focus on value for money and protection for savers
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Market Size and Forecast
- Outlook in light of COVID-19
- Short-, medium- and long-term impact on the industry
- Figure 11: Expected impact of COVID-19 on workplace pensions, short, medium and long term, 31 July 2020
- Short-term impact (0-6 months)
- Medium-term impact (6-24 months)
- Long-term impact (2+ years)
- New contracts are down but premiums rose by 15% in 2019…
- Figure 12: Volume and value of total new insurer-administered workplace pension business (regular and single premium business), 2015-19
- …and regular premiums rose by over a quarter
- Figure 13: Volume and value of total new insurer-administered workplace pension business, by type of premium, 2015-19
- Insurer-administered DC schemes were worth £76 billion in 2018
- Figure 14: Volume of insurer-administered DB and DC pension scheme members and value of premiums and assets under administration, 2018
- New business is tied to the performance of the jobs market
- Figure 15: Forecast of value of new insurer-administered workplace pension business (APE), 2015-25
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- Figure 16: Forecast of value of new insurer-administered workplace pension business (APE), 2020-25
- Lessons from the financial crisis
- Figure 17: Volume and value of total new insurer-administered workplace pension business (regular and single premium business), 2007-15
-
- Figure 18: Volume and value of new insurer-administered workplace pension business, by type of premium, 2007-15
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Trends in Workplace Pension Membership
- Workplace pension membership has plateaued
- Figure 19: Proportion of employees who are enrolled in a workplace pension, 2010-19
- Only 48% of private-sector part-time workers have a workplace pension
- Figure 20: Proportion of employees who are enrolled in a workplace pension, by employment sector and working pattern, 2019
- Pension types are split between the public and private sectors
- Figure 21: Type of workplace pension enrolled in, by employment sector, 2019
- Workplace pension membership has plateaued
-
Market Drivers
- The impact of COVID-19 on workplace pensions
- Unemployment is set to spike in 2020…
- Figure 22: Annual unemployment rate (forecast), 2007-24
- …with the number of benefits claimants having already risen sharply
- Figure 23: Unemployment benefit claimant rate, January 2007-May 2020
- Furloughing will hit contributions
- Figure 24: Volume and value of Coronavirus Job Retention Scheme claims, 23 April-5 July 2020
- Fund values have fallen
- 10.3 million employees have been auto-enrolled into a workplace pension
- Figure 25: Auto-enrolment declarations of compliance, May 2020
-
Regulatory and Legislative Changes
- Expansion of auto-enrolment is still set for the ‘mid-2020s’
- Number of master trusts shrinks due to new authorisation regime
- Reviews focus on value for money and protection for savers
- Pensions Dashboards continue to be the subject of debate
- “Backto60” campaign set for Court of Appeal
- State pension ‘triple lock’ brought under threat as a result of COVID-19…
- …while the outbreak has forced MaPS to change priorities
- Call for quicker re-enrolment for COVID-19 pension dropouts
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Companies and Brands – What You Need to Know
- NEST is the biggest workplace pension provider
- COVID-19 raises fraud worries and calls for flexibility
- Ethical and eco-friendly investing becomes a mainstream concern
- Above-the-line adspend fell to £12.2 million in 2019/20
-
Provider Rankings
- NEST is the biggest workplace pension provider
- Cardano Group completes acquisition of NOW: Pensions
- Rothesay Life regains market lead in trust-based pension business
- Figure 26: Rankings of top 20 providers of trust-based pension business, by gross written premiums, 2016-18
- Individual and work-based rankings
- Figure 27: Rankings of top 20 providers of individual and work-based pension business, by gross written premiums, 2016-18
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Competitive Strategies
- Firms face up to COVID-19-related scams
- Scottish Widows calls for pensions flexibility in times of crisis
- Ethical and eco-friendly investing is a mainstream concern
- PensionBee becomes founding partner of “Make My Money Matter”
- NEST steps up climate action
- Aviva launches ‘Stewardship lifestyle strategy’ for ethical investing
- NEST introduces choice of death benefit to help with tax considerations
- Revolut and Smart Pension team up for speedy auto-enrolment
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Advertising and Marketing Activity
- COVID-19 and the marketing mix
- Above-the-line adspend fell to £12.2 million in 2019/20
- Figure 28: Total above-the-line, online display and direct mail advertising expenditure on pension products* and advice, 2015/16-2019/20
- Government campaigns made up two thirds of adspend in the last year
- Figure 29: Top 10 advertisers of pension products* and advice, 2017/18-2019/20
- Nielsen Ad Intel coverage
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The Consumer – What You Need to Know
- Reduced spending and state support have softened the blow of COVID-19
- Three quarters of employees are enrolled in a workplace pension
- Significant confusion around pension types
- Almost half don’t know how much they are contributing to their pension
- High satisfaction with regularity of pension updates
- Confidence in pensions understanding may be seriously misplaced
- Investment strategies must consider planned retirement dates
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Consumer Confidence and the Impact of COVID-19
- Financial wellbeing has survived the outbreak
-
- Figure 30: The financial wellbeing index, January 2015-June 2020
- Reduced outgoings have limited the financial hit of COVID-19
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- Figure 31: How consumers have been affected or changed their behaviour as a result of COVID-19, 21-28 May 2020
- Finances are more likely to have declined than improved in the last year…
-
- Figure 32: Changes in household finances, January 2015-June 2020
- …and a third are worse off since the start of the COVID-19 outbreak
-
- Figure 33: Changes in financial situation since the start of the COVID-19 outbreak, 25 June-1 July 2020
- Confidence fell sharply when lockdown was announced
-
- Figure 34: The financial confidence index, January 2015-June 2020
- Serious concerns about the impact of COVID-19 on jobs and the economy
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- Figure 35: Consumer views on the impact of the COVID-19 outbreak on the UK economy and their own finances, 18-24 June 2020
- Savings priorities have shifted since the outbreak started
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- Figure 36: Savings priorities, October 2019 vs May 2020
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Workplace Pension Membership
- Three quarters of employees are enrolled in a workplace pension
- Figure 37: Workplace pension enrolment, April 2020
- Part-time work limits membership among younger and older workers
- Figure 38: Workplace pension enrolment, by age, April 2020
- No early signs of a COVID-19 rise in opt-out rates
- Figure 39: Workplace pension enrolment, March 2019 vs April 2020
- Three quarters of employees are enrolled in a workplace pension
-
Type of Workplace Pension Scheme
- Significant confusion around pension types
- Figure 40: Type of workplace pension enrolled in, by employment sector, April 2020
- Women should be the focus for raising awareness
- Figure 41: Type of workplace pension enrolled in, by gender, April 2020
- Significant confusion around pension types
-
Workplace Pension Contributions
- Almost half don’t know how much they are contributing to their pension
- Figure 42: Workplace pension contributions, April 2020
- DB members have higher average contributions
- Figure 43: Workplace pension contributions – rebase, by type of workplace pension enrolled in, April 2020
- Almost half don’t know how much they are contributing to their pension
-
Workplace Pension Communications
- Three quarters are happy with pension updates…
- Figure 44: Attitudes towards workplace pension communications, April 2020
- …but only half have received information on retirement options
- Strong prospects for growth of digital services
- Figure 45: Agreement with the statement “I have used/would be interested in using an app that gave me access to information about my workplace pension”, by age, April 2020
- Three quarters are happy with pension updates…
-
Understanding of Workplace Pensions
- Confidence in pensions understanding may be seriously misplaced
- Figure 46: Consumers’ understanding of their workplace pension, April 2020
- COVID-19 and pensions behaviours
- Confidence in pensions understanding may be seriously misplaced
-
Attitudes towards Workplace Pensions
- Investment strategies must consider planned retirement dates
- Figure 47: Consumer attitudes towards workplace pensions, April 2020
- Understanding does not extend to researching retirement needs
- Figure 48: Agreement with selected attitudes towards workplace pensions, by response to the statement “I am confident I have all the information I need about my workplace pension”, April 2020
- Ethical and eco concerns peak among urban families
- Figure 49: Agreement with the statement “It’s important to me that my workplace pension is invested in funds that have a positive impact on society (eg invested in companies with strong environmental values)”, CHAID – Tree output, April 2020
- Investment strategies must consider planned retirement dates
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Appendix – Data Sources, Abbreviations and Supporting Information
- Abbreviations
- Consumer research methodology
- CHAID analysis methodology
- Figure 50: Workplace Pensions – CHAID – Table output, April 2020
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