Abstract
The overall market for personal pensions has been growing steadily over the last few years, although pension ownership amongst the adult population in the UK remains relatively low. SIPPs have become increasingly popular over the last few years, whilst stakeholder pensions have failed to achieve the success that many had hoped for. The reform of the UK pensions system is likely to have a major impact on the market, although uncertainty remains over what this might be.
The UK' s ageing population is a particular concern for the government, whilst the long-term growth in personal disposable income bodes well for the market. The collapse and closure of occupational schemes has encouraged many to go the route of individual pensions, and regulatory changes like A-day, the Retail Distribution Review, and the Pensions White Paper have all made their mark on the industry. Consumer perceptions that products are complicated, coupled with a highly apathetic attitude towards retirement planning, are probably the main barriers to greater penetration - although if it were possible to make pensions sexy, someone would probably have done it by now.
This report looks in detail at the personal pensions market, exploring the many factors that influence the market and drive consumer demand. As well as internal and external market factors, regulatory developments are summarised. Competitive products are explored before looking at examples of innovation within the marketplace. A presentation of key company profiles follows alongside an analysis of market shares and distribution channels. This report also contains a dedicated section on branding in which the personality of individual brands as well as the characteristics of the wider industry is presented.
Key issues:
- Pensions are perceived by most as being complicated… and boring.
- Most consumers have an apathetic attitude towards pensions.
- An ageing population is forcing the government to encourage retirement self-provision.
- Most new business comes in through IFAs, but access to such advice is restricted.
- Alternatives to pension ownership, particularly buy-to-let, are becoming popular.
Table of Contents
- Issues in the Market
- Key issues
- Abbreviations
- 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'
- 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
- 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
- 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
- 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
