Retirement Planning - UK - January 2017

OVERVIEW
What you need to know
EXECUTIVE SUMMARY
The market
More pensioners, more pressure on the state pension
Figure 1: Expectation of life, principal projection, UK, 1981-2062
Auto-enrolment continues to increase workplace pension ownership
Figure 2: Pension provisions of UK workers, by type of pension, 2010-15
The consumer
Pension ownership rises but savings and investments stay largely stable
Figure 3: Savings and pension product ownership, October 2016
Figure 4: Investment product ownership, October 2016
Savings accounts and ISAs expected to play a large role in retirement
Figure 5: Products expected to be used to fund retirement, October, 2016
Most workplace pension contributors are paying in the minimum amount
Figure 6: Current workplace pension contribution levels, October 2016
Face-to-face is the preferred channel for professional advice
Figure 7: Interest in different channels for receiving retirement advice and guidance, by types of advice and guidance, October 2016
Two fifths plan to save and invest in the same manner after retiring
Figure 8: Post-retirement saving and investing plans, October 2016
Funding retirement is a concern for many but a priority for few
Figure 9: Attitudes towards retirement planning, October 2016
There is little optimism surrounding retirement
Figure 10: Attitudes towards retirement, October 2016
What we think
ISSUES AND INSIGHTS
Consumers need a push to improve pension saving habits
The facts
The implications
A more positive message is necessary to boost engagement
The facts
The implications
Online advice is the future, but Baby Boomers need to be shown it is the present too
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
More pensioners, more pressure on the state pension
Auto-enrolment continues to increase workplace pension ownership
The retirement advice market faces more regulatory changes
Online planning tools target Millennials and Baby Boomers alike
RETIREMENT PLANNING ENVIRONMENT
Longer life expectancies put greater importance on retirement decisions
Figure 11: Expectation of life, principal projection, UK, 1981-2062
More pensioners, a greater burden on the state
Figure 12: UK population, by age band, and dependency ratios, 2014-84 (based on 2014 projections)
The new state pension took effect in 2016
Figure 13: Projected dates for full transitions to increase state pension ages, by gender
RETIREMENT FUNDING OPTIONS
DC membership continues to grow due to auto-enrolment…
Figure 14: Pension provisions of UK workers, by type of pension, 2010-15
…and attention now turns to increasing contributions
Figure 15: Auto-enrolment minimum contribution timetable
Personal pensions membership slides as a result of auto-enrolment
Figure 16: Number of personal pension schemes, excluding SIPPs, in force, 2010-15
Lifetime ISAs set to launch as an alternative to pensions
Figure 17: Number of ISAs and amounts subscribed, segmented by component type, 2011/12-2015/16
Income drawdown has overtaken annuities
Figure 18: Volume and value of new annuities and income drawdown contracts, 2013-16
Buy-to-let market hit by regulatory changes
Figure 19: Number of mortgages for buy-to-let, monthly, November 2013-October 2016
REGULATORY AND LEGISLATIVE CHANGES
FAMR looks to make advice more affordable and accessible…
…but official guidance services are about to change
Advice allowance: enough to increase take-up?
Encouraging competition in annuities
The Government closes pension ‘recycling’ tax loophole
RECENT MARKET DEVELOPMENTS
Aviva targets Millennials with Shape My Future service…
…and has returned to the advice market
Saga launches planning tool for over-50s
Employer-based advice and guidance enters the market
THE CONSUMER – WHAT YOU NEED TO KNOW
Pension ownership rises but savings and investments stay largely stable
Savings accounts and ISAs expected to play a large role in retirement
Most workplace pension contributors are paying in the minimum amount
Face-to-face is the preferred channel for professional advice
Funding retirement is a concern for many but a priority for few
There is little optimism surrounding retirement
SAVINGS AND INVESTMENT PRODUCT OWNERSHIP
Workplace pension ownership rises to 36%
Figure 20: Savings and investments product ownership, October 2015 vs October 2016
Savings and investments ownership stay largely stable
Pension inequalities persist
RETIREMENT FUNDING PLANS
Not all pension holders expect their pension to fund retirement
Figure 21: Products expected to be used to fund retirement, October, 2016
Popularity of Cash ISAs could point to a bright future for Lifetime ISAs
A third plan to fund their retirement with just one product
Figure 22: Repertoire of products expected to be used to fund retirement, October 2016
WORKPLACE PENSION CONTRIBUTION ACTIVITY
Most workplace pension contributors are paying in the minimum amount
Figure 23: Current workplace pension contribution levels, October 2016
A third of DC pension holders voluntarily pay above the required amount
Women’s contributions lag behind men
Figure 24: Current workplace pension contribution levels, by gender, October 2016
ADVICE AND GUIDANCE CHANNELS
Face-to-face is the preferred channel for professional advice…
Figure 25: Interest in different channels for receiving retirement advice and guidance, by types of advice and guidance, October 2016
…but online channels are more popular for guidance services
Baby Boomers are resistant to online channels services
Figure 26: Interest in using online methods to access professional retirement advice and guidance services, by generation, October 2016
POST-RETIREMENT SAVING AND INVESTING PLANS
Two fifths plan to save and invest in the same manner after retiring
Figure 27: Post-retirement saving and investing plans, October 2016
People are aware of the length of retirement
Wealthier savers and investors are more likely to have a post-retirement plan
Figure 28: Post-retirement saving and investing plans, October 2016
ATTITUDES TOWARDS RETIREMENT PLANNING
Funding retirement is a major concern…
Figure 29: Attitudes towards retirement planning, October 2016
…but a relatively low priority
Figure 30: Current workplace pension contribution levels, by agreement with the statement “Planning for retirement is a priority for me at the moment”, October 2016
Education about retirement options is essential
ATTITUDES TOWARDS RETIREMENT
Is retirement becoming a thing of the past?
Figure 31: Attitudes towards retirement, October 2016
Generation X are the most pessimistic about retirement
Figure 32: Agreement with the statements “I think my generation will not have as comfortable a retirement as previous ones”, and “I think my generation will have a more comfortable retirement than future ones”, by generation, October 2016
The state pension age: no longer the default marker of retirement
Figure 33: Agreement with the statement “I plan to retire as soon as I can claim the state pension”, by agreement with the statement “I expect to have a comfortable income in retirement”, October 2016
APPENDIX – DATA SOURCES, ABBREVIATIONS, AND SUPPORTING INFORMATION
Abbreviations
Consumer research methodology