Personal and Stakeholder Pensions - UK - March 2008

ISSUES IN THE MARKET
Key issues
 ABBREVIATIONS
INSIGHTS AND OPPORTUNITIES
Converting the sceptics
Boosting the image of providers
Cutting down on red tape
Bringing pensions front-of-mind
MARKET IN BRIEF
New premiums into personal pensions have increased
Figure 1: New individual pension APE* premiums, by product type, 2002-07
Many factors have encouraged market growth…
Concerns are mounting over an ageing population
The decline of occupational schemes has boosted the market
Figure 2: Status of private sector occupational pension schemes, 2006
AXA leads the market
Advertising budgets for pensions are relatively small
Figure 3: Advertising expenditure, by financial services category, 2002/03-2006/07
The majority of new business comes through an IFA
Occupational pensions are more commonly held
Many perceive pensions to be ‘complicated’
FAST FORWARD TRENDS
Rule of Thumb
What’s it about?
Market touchpoints and implications
Home as Pension
What’s it about?
Market touchpoints and implications
Living Better, Longer
What’s it about?
Market touchpoints and implications
INTERNAL MARKET AND REGULATORY ENVIRONMENT
Key points
The decline of occupational pension schemes
Basic state pension = basic lifestyle in retirement
S2P replaces SERPS
The impact of A-day…
Figure 4: Pensions lifetime allowance and annual allowance, 2006/07-2010/11
…with more options after retirement
Reform of the UK pensions system
Figure 5: Summary of reccomendations in the Pensions White Paper
The impact of personal accounts on the pensions industry?
Figure 6: Department for Work and Pensions model of the pensionable population, 2004
The Retail Distribution Review
Increasing consumer understanding
What’s all this ‘fair treatment’ business about?
BROADER MARKET ENVIRONMENT
Key points
The UK’s ticking pensioner time bomb
Figure 7: Population growth projections, by age, 2002-12
Changing longevity assumptions
Stockmarket volatility may discourage investment
Figure 8: FTSE 100 Share Index, Jan 2006-Dec 2007
A tough year expected in 2008 will hit pension contributions
Figure 9: Financial priorities over the next 12 months, by order of significance, January 2008
The growing number of ABs is a positive sign for providers…
Figure 10: Population, by socio-economic distribution, 2002-12
…as is the increasing amount of personal disposable income
Figure 11: PDI, consumer expenditure and savings, 2002-12
Macro-economic situation could cloud the picture
COMPETITIVE CONTEXT
Key points
Occupational pension schemes on the decline
Figure 12: Number of private sector occupational pension schemes in the UK, by scheme size, 2002-06
Half of private sector schemes frozen, closed or winding up
Figure 13: Status of private sector occupational pension schemes, 2006
The continued rise of equity release…
Figure 14: Lifetime mortgages newly advanced and balances outstanding, by volume and value, 2002-06
…and the buy-to-let market
Figure 15: Number and value of buy-to-let sales, 1999-2007
ISAs as an alternative to a pension?
Figure 16: ISA deposits, by type of ISA, 2001/02-2006/07
STRENGTHS AND WEAKNESSES IN THE MARKET
 MARKET STRENGTHS
Longevity increases the need for (larger) pensions
The appeal of tax-efficient contributions
Increasing flexibility in the market
Personal accounts may raise the profile of personal pensions
 MARKET WEAKNESSES
A tightly regulated market limits opportunity for product development
Weakness in the economy forecast for 2008 may discourage investment
Perception that pensions are complicated and reserved for the affluent
Personal accounts are a potentially competing product
WHO’S INNOVATING?
Key points
The difficulty of innovating in pensions
New funds and restructured investment products
More activity on SIPPs
Technological developments
TRADE PERSPECTIVE
The struggles of stakeholder pensions
The growth of SIPPs
The impact of personal accounts
Transfers into personal pensions on the rise
Adviser commissions influence the market
So how is the RDR going to change things?
The impact of A-day
MARKET SIZE AND FORECAST
Key points
Individual vs. occupational pension schemes
Figure 17: Total new premiums paid into individual and occupational pensions, 2002-07
A permanent shift in the balance
The gradual decline of individual personal pensions
Figure 18: Total number of policies and regular premiums from individual pensions business in force, by pension type, 2002-06
Disappointing increase in policies in force
There’s big ones (personal pensions) and small ones (SIPPs)
Figure 19: Total number of individual pensions in force, by pension type, 2006
Doom and gloom for stakeholder pensions?
Figure 20: New individual pension premiums, by product type, 2002-07
SIPPs lead the way
 MARKET FORECAST
Figure 21: New APE* premiums into individual pensions, by pension type, 2003-12
SIPPs continue to grow, stakeholders to stagnate
Factors used in the forecast
MARKET SHARE
Key points
AXA has climbed to lead the pack in 2006
Figure 22: Ranking of individual pension providers, based on UK gross written premium, 2004-06
COMPANIES AND PRODUCTS
Fund performance varies between providers
Figure 23: Best-performing unit-linked and with-profits pensions, decade to March 2008
AXA (AXA Sun Life)
Standard Life
AVIVA plc (Norwich Union Life)
Lloyds TSB Group (Scottish Widows)
AEGON plc (Scottish Equitable)
BRAND COMMUNICATION AND PROMOTION
Key points
Pensions is a small proportion of total financial services adspend
Figure 24: Advertising expenditure, by financial services category, 2002/03-2006/07
A large proportion of adspend is accounted for by intermediaries
Figure 25: Pensions advertising expenditure, by sub-category, 2003/04-2006/07
The top ten providers account for over half of all pensions adspend
Figure 26: Pensions advertising expenditure, by provider, 2006/07
Press is the medium of choice for advertising pensions
Figure 27: Pensions advertising expenditure, by media type, 2006/07
BRAND ELEMENTS
 BRAND MAP
Figure 28: Attitudes and usage of pensions brands, February 2008
 BRAND EXPERIENCE OF PENSIONS BRANDS
Norwich Union stands out on awareness and popularity
Figure 29: Consumer usage of pensions brands, February 2008
 BRAND MOMENTUM OF PENSIONS BRANDS
Norwich Union is gaining, Friends Provident losing ground
Figure 30: Momentum of various pensions brands, February 2008
 BRAND INTENTIONS OF PENSIONS BRANDS
Friends Provident, Zurich and Scottish Life have low retention
Figure 31: Consideration of pensions brands, February 2008
 BRAND QUALITIES OF PENSIONS BRANDS
Norwich Union, Prudential and Scottish Widows are seen as most expert
Figure 32: Consumer usage of pensions brands, February 2008
Brand attitudes towards pension brands
Scottish Widows and Prudential have best reputation
Figure 33: Consumer attitudes towards pensions brands, February 2008
 BRAND MOTIVATION OF PENSIONS BRANDS
Norwich Union and Scottish Widows are best thought of for personal and stakeholder pensions
Figure 34: Momentum of pensions brands, February 2008
 BRAND SATISFACTION OF PENSIONS BRANDS
Norwich Union most positive, Scottish Life most negative endorsement
Figure 35: Brand satisfaction of pension companies, February 2008
Brand commitment of pension brands
Scottish Equitable has the highest customer loyalty
Figure 36: Commitment to pensions brands, February 2008
 ROUND-UP
CHANNELS TO MARKET
Key points
The majority of new business comes through an IFA
Figure 37: New APE* premiums into individual pensions, by distribution channel, 2002-07
Individual stakeholder pensions are sold by more tied agents…
Figure 38: New regular premiums into individual pensions, by type of pension and distribution channel, Q1-Q3 2007
…since stakeholder pensions are more suited to bancassurance
Figure 39: New regular premiums into individual pensions, via bancassurance, and by type of pension, 2005-07
THE CONSUMER: PENSION OWNERSHIP AND CONTRIBUTION LEVELS
Key points
A word on analysis methodology
A quarter of us are making no provision for retirement
Figure 40: Pension ownership, December 2007
SIPPs have become popular
How does all this bode for the industry?
Overview of consumer profiles by pension type held
Figure 41: Pension ownership, by gender, age, and socio-economic-group (excluding respondents that are already retired), December 2007
Final-salary schemes are reserved for the upper classes
Pension ownership increases with age and income
Figure 42: Pension ownership, by marital status, lifestage, working status, household income and ACORN category, December 2007
Single people are less likely to have a pension
Pension ownership increases with earnings
Over two fifths pay less than £100 a month into a pension
Figure 43: Monthly pension contributions, December 2007
Insufficient pension contribution levels?
Men tend to contribute more than women
Figure 44: Monthly pension contributions, by gender, age, lifestage, household income and tenure, December 2007
Higher earners contribute more
Renters may be worth targeting
Personal pension holders are likely to pay in less
Figure 45: Monthly pension contributions, by type of pension, December 2007
THE CONSUMER: ATTITUDES TOWARDS PENSIONS
Key points
Only two fifths of us trust IFAs to give good pensions advice
Figure 46: Attitudes towards different sources of pensions advice, December 2007
Wealthy individuals are more likely to trust IFAs
Figure 47: Attitudes towards different sources of pensions advice, by gender, age, socio-economic group, marital status, tenure and ACORN category, December 2007
Younger people turn to family, not the professionals…
…but responses raise issues over the NPSS
Pensions associated with a comfortable retirement…
Figure 48: Consumer word associations with pensions, December 2007
…but there are still negatives
Most feel duty-bound when it comes to owning a pension
Figure 49: Consumer attitudes towards pensions, by mindset groups, December 2007
Positives outweigh the negatives
Men are more likely to have reservations
Figure 50: Consumer attitudes towards pensions, by mindset groups, by gender, age, marital status, lifestage and household income, December 2007
Apathy is a condition of the young mind
The unmarried have fewer reservations
Families hold stronger reservations about pensions
High earners see pensions as a duty-bound obligation
THE CONSUMER: TARGET GROUP ANALYSIS
Key points
Five key target groups
Figure 51: Target group sample sizes, December 2007
Figure 52: Target group pension contributions, December 2007
Dutiful Savvies (8% of adults)
Provider Trusters (20% of adults)
Trustless Sceptics (15% of adults)
Lower-income Lethargics (34% of adults)
Lower-income Lethargics are apathetic
Figure 53: Target groups, by sources trusted pensions advice and word associations regarding pensions, December 2007
Dutiful Savvies are more likely to make higher contributions
Figure 54: Target groups, by monthly pensions contributions, December 2007
Provider Trusters favour the SIPP
Figure 55: Target groups, by pension ownership, December 2007
APPENDIX: PENSION OWNERSHIP AND CONTRIBUTION LEVELS
Figure 56: Pension ownership, by gender, age, socio-economic-group, marital status, lifestage, presence of children, Mintel’s Special Groups, working status, household income, car ownership, detailed lifestage groups and age/socio-economic group (excluding respondents that are already retired), December 2007
Figure 57: Pension contributions, by gender, age, socio-economic-group, marital status, lifestage, presence of children, Mintel’s Special Groups, working status, household income, tenure, region, ACORN category, media usage, supermarket usage, household size, car ownership, detailed lifestage groups, age/socio-economic group and terminal education age (excluding respondents that are already retired), December 2007
APPENDIX: TARGET GROUP ANALYSIS
Figure 58: Target groups, by gender, age, socio-economic group, marital status, lifestage, presence of children, Mintel’s Special Groups, working status, household income, tenure, region and ACORN category, December 2007