UK Distribution Landscape Overview 2006

Publication Date	January 2007
Publisher	Datamonitor
Product Type	Report
Pages	132
ISBN Number	not applicable
Product Code	DAT04320

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Summary

Introduction

An examination of the UK life and pensions distribution landscape. The report looks at what products are sold, through which distribution channels, who the largest players are, and the factors that are shaping the market.

Scope

Historic data from the ABI and IMA is given to size the UK market and its key distribution channels, focusing on financial advisors and bancassurers
Five product categories are examined: single and regular premium life, single and regular premium pensions and retail sales of unit trusts and OEICs
The analysis is underpinned by in-depth interviews with a number of senior executives from both the distribution and provider sides of the market
Our forecasts for the future of distribution channels are given, with predictions for the multi-tie share of the market across product areas

Highlights

Despite fears about the potential rise of bancassurers, IFAs remain by far the most important distribution channel for life and pensions products in the UK. However, bancassurers have gained some market share in recent years.

Depolarization has not had the effect predicted by the FSA at its inception. Instead of a radical shift, post-depolarization developments indicate a rather gradual transition to a new market segmentation.

Although multi-tie advisors are predicted to a rise in their market share from 4% in 2006 to 8.5% in 2010, only 2% of this will be at the expense of the IFA channel, whose market share will remain relatively constant at around 66.5%.

Reasons to Purchase

Use Datamonitor and competitor opinion to gain an insight into the key areas and trends in the UK life and pensions market
Identify the market opportunities and pressures that are currently impacting the different distribution channels
Understand how the various distribution channels and multi-tie propositions will develop over the next five years

Content

Executive Summary
- Distribution Landscape
- Snapshot of distribution channels
- Provider landscape
- Distribution Trends and issues
- The Future Decoded
- Chapter 1 Uk Distribution Landscape Product Suite
  - UK Distribution Overview 2006
  - UK IFAs 2006
  - UK Bancassurance 2006
- Chapter 2 Introduction And Methodology
  - Scope of the report
  - Data
  - Report structure
- Chapter 3 Distribution Landscape
  - Introduction
  - Key findings
  - Channel definitions for the distribution of life and pensions products, 2006 onwards
  - IFAs still dominate the life and pensions distribution market in the UK but bancassurers have gained market share
  - Pensions account for 58% of IFA sales in the total life and pensions market in 2005
  - The single and regular premium pensions markets continue to show positive growth, reflected in increased sales through IFAs
  - Personal pensions accounted for almost half of total IFA single premium pensions business in 2005
  - IFAs have almost quadrupled sales of SIPPs since 2004
  - Group personal pensions account for 56% of IFAs' regular premium pensions new business
  - Single premium sales dominate the life market, but bancassurancers have overtaken IFAs in regular premium sales
  - Unit linked bonds remain the leading product in IFAs' single premium sales as with-profits bonds continue to decline
  - Term assurance accounts for more than three quarters of regular premium sales through IFAs
  - Unit trusts and OEICs sold by IFAs
  - Unit Trust and OEIC sales are vital to IFA business
  - IFAs now account for over three quarters of unit trust and OEIC sales in the UK
  - Life products account for 84% of bancassurance sales in the total life and pensions market in 2005
  - Bancassurers have seen more growth in single premium life than regular premium life sales in the last two years
  - Unit-linked bonds and ditribution bonds sales via bancassurance have risen in 2005
  - Contrary to market trends and expectations, bancassurers have significantly increased sales of mortgage related products in 2005
  - Bancassurers are selling more regular premium pensions than single premium pensions
  - Stakeholder pensions remain by far the most popular form of regular premium pension in bancassurance
  - Single-tie distribution is on a decline while non-intermediated sales have shown moderate growth over the last five years
  - Regular premium life is the most important product category for the non-intermediated distribution channel
  - Single premium pensions are the only product category where the single-tie distribution channel has experienced growth
  - The non-intermediated distribution channel has experienced slight growth in sales of regular premium pensions in the last five years
  - Data Tables
- Chapter 4 Snapshot Of Distribution Channels
  - Introduction
  - Key findings
  - The UK IFA market is comprised of a varied mix of small, medium and large sized firms
  - The total number of IFA firms in the UK has increased since 2005
  - The number of network member firms has declined by almost 20% since 2003
  - Total IFA firm turnover increased by 9.6% between 2005 and 2006
  - Sesame has recovered the ground it lost in 2005, and retained its position as the largest UK IFA network
  - The top 20 IFAs have increased their market share, but still account for less than a third of total turnover
  - The largest bank is not automatically the largest bancassurer
  - Barclays is the bank with the largest branch network in the UK but it's not the largest bancassurer
  - HBOS is the dominant player in the UK bancassurance market
  - Life and Pension advertising expenditure in bancassurance
  - Non-traditional distributors originate from various industries
  - From ASDA to Virgin - all want a share of the UK financial market
  - Retailers have continually widened their financial services offering
  - Life and Pension advertising expenditure in non-traditional distribution
  - Data Tables
- Chapter 5 Provider Landscape
  - Introduction
  - Key findings
  - The life and pensions market in the UK is highly competitive
  - Depolarisation has led to a diversification of distribution channels
  - Norwich Union has the strongest market share position in the UK
  - In 2005 life insurers spent more than GBP40m on advertising
  - HBOS recorded highest sales of single premium life products in 2005
  - Legal & General recorded highest sales of regular premium life products in 2005
  - Aviva recorded highest sales of single premium pension products in 2005
  - Standard Life recorded highest sales of regular premium pension products in 2005
  - An increasing number of providers offers products online
  - Data Tables
- Chapter 6 Distribution Trends And Issues
  - Introduction
  - Key findings
  - Depolarization has not had the effect originally anticipated
  - IFAs do not see a radical shift following depolarization and remain confident
  - Depolarization may benefit the bancassurers on the longer term
  - Most non-traditional distributors offer products from one provider
  - Providers seek to expand and diversify their distribution strategies
  - FSA sets out priorities for its review of UK retail distribution
  - The FSA wants to be the catalyst for change in retail distribution
  - IFAs prepare to defend their business model
  - FSA pulls new products under its control
  - Non-traditional distributors struggle, with varying success
  - In non-traditional distribution the customer initiates the purchase
  - Some experts question the suitability of non-traditional distributors
  - Providers seek to explore the potential of worksite marketing
  - Despite promising potential, opinions among experts are divided
- Chapter 7 The Future Decoded
  - Introduction
  - Key findings
  - IFAs will remain the dominant life and pensions distribution channel in the UK
  - Multi-tie distribution will see strong single premium pensions sales
  - The regular premium life market will decline in the next five years
  - SIPPs are expected to drive IFAs' single premium pensions sales
  - IFAs account for the vast majority of regular premium pensions sales
  - Data tables
- Appendix
  - Definitions
  - Single premium policy
  - Regular premium
  - New business
  - Wrap accounts
  - Life based savings products
  - Life Product Definitions
  - Single Premium Life
  - Annual Premium Life
  - Pension product definitions
  - ABI definitions of distribution channels
  - Matrix-Data
  - Notes to IFA Firm categorizations
  - Forecasting methodology
  - Regression analysis is unsuitable for Life and Pensions forecasting
  - Datamonitor uses a qualitative forecasting methodology for Life and Pensions
- Further reading
  - Savings and Investments SPP
  - Life and Pensions SPP
  - Financial Advice Market SPP
  - SPP writing team
- List Of Tables
  - Table 1: Total UK life and pensions sales by segment, 2000-2005
  - Table 2: Total UK IFA life and pensions sales by segment, 2000-2005
  - Table 3: Total life and pensions market segmented by distribution channel, 2001-2005
  - Table 4: Total life and pensions sold through the IFA channel, 2000-2005
  - Table 5: Sales of life new business premiums through the IFA channel, segmented by single and regular premium, 2000-2005
  - Table 6: Sales of pensions new business premiums through the IFA channel, segmented by single and annual premium, 2000-2005
  - Table 7: Sales of life new business single premiums through the IFA channel, segmented by product type, 2004-2005
  - Table 8: Sales of life new business regular premiums through the IFA channel, segmented by product type, 2004-2005
  - Table 9: Sales of pensions new business single premiums through the IFA channel, segmented by product type, 2004-2005
  - Table 10: Sales of pensions new business regular premiums through the IFA channel, segmented by product type, 2004-2005
  - Table 11: Total gross retail sales of unit trusts and OEIC products, 2004-2005
  - Table 12: Total life and total pensions business sold through the bancassurance channel 2001-2005
  - Table 13: Sales of life products through the bancassurance channel 2001-2005
  - Table 14: Single premium life product sales through the bancassurance channel segmented by product type 2004 - 2005
  - Table 15: Regular premium life product sales through the bancassurance channel segmented by product type 2004  2005
  - Table 16: Sales of pension products through the bancassurance channel 2001 - 2005
  - Table 17: Regular premium pensions product sales segmented by product type 2004 - 2005
  - Table 18: Single premium pensions product sales segmented by product type 2004-2005
  - Table 19: Network members by number and by turnover, 2002-2006
  - Table 20: Distribution status of top banks and building societies, 2006
  - Table 21: Life and Pension advertising expenditure in bancassurance 2005
  - Table 22: Life insurance and savings products offered by Tesco
  - Table 23: Life insurance and savings products offered by Sainsbury's
  - Table 24: Life insurance and savings products offered by the Post Office
  - Table 25: Selection of other non-traditional players in financial services
  - Table 26: Life and Pension advertising expenditure in non-traditional distribution 2005
  - Table 27: Total number of IFA firms in the UK segmented by type, 2005-2006
  - Table 28: Gross annual turnover of IFA firms segmented by type, 2005-2006
  - Table 29: Average annual turnover per IFA firm, 2005-2006
  - Table 30: Top 20 IFA firms (including networks) by turnover, August 2005 to July 2006
  - Table 31: Life and Pension advertising expenditure of UK insurers 2005
  - Table 32: Major UK insurance companies' online product offer 2006
  - Table 33: UK Top 5 providers' new business sales of life and pensions products 2005, GBPm APE
  - Table 34: New business sales of single premium life products 2005, GBPm APE
  - Table 35: New business sales of regular premium life products 2005, GBPm APE
  - Table 36: New business sales of single premium pension products 2005, GBPm APE
  - Table 37: New business sales of regular premium pension products 2005, GBPm APE
  - Table 38: UK Life and Pension advertising expenditure, 2001-2005, GBPm
  - Table 39: Total life and pensions market segmented by distribution channel, 2006f-2010f
  - Table 40: Single premium life market segmented by distribution channel, 2006f-2010f
  - Table 41: Regular premium life market segmented by distribution channel, 2006f-2010f
  - Table 42: Single premium pension market segmented by distribution channel, 2006f-2010f
  - Table 43: Regular premium pension market segmented by distribution channel, 2006f-2010f
- List Of Figures
  - Figure 1: Bundling structure of UK Distribution Landscape 2006
  - Figure 2: Report structure of the UK Distribution Landscape 2006 report
  - Figure 3: IFAs are still the most dominant players but banks catch up
  - Figure 4: Pensions have been the dominant product in the total life and pensions market since 2001
  - Figure 5: The value of single premium pension sales through the IFA channel has grown by 12% since 2004
  - Figure 6: Personal pensions account for 44% of total single premium pensions new business sold through the IFA channel in 2005
  - Figure 7: Group personal pensions accounted for 56% of total regular premium pensions new business income sold through the IFA channel in 2005
  - Figure 8: Single premium life business has continued to see strong growth since 2004
  - Figure 9: Unit-linked bonds now account for over 80% of total single premium life sales
  - Figure 10: Term assurance accounts for over 75% of regular premium life sales through IFAs
  - Figure 11: Unit trust/OEICs account for around 60% of total IFA life and pensions sales
  - Figure 12: IFAs have handled over 60% of unit trust and OEIC sales since 2001
  - Figure 13: Sales of life products show strong recovery while pensions business is stagnating
  - Figure 14: Bancassurance did not suffer as badly as other distribution channels between 2002 and 2003
  - Figure 15: Bancassurers saw more growth in single premium life than regular premium life business in recent years
  - Figure 16: Unit-linked bonds and distribution bonds sales increased in 2005, contrasted with the decline of guaranteed equity bonds
  - Figure 17: Contrary to market trends, bancassurers have significantly increased sales of mortgage related products in 2005
  - Figure 18: Bancassurers' sales of regular premium pensions have broken the downward trend in 2005
  - Figure 19: Stakeholder pensions remain by far the most popular form of regular premium pension in bancassurance
  - Figure 20: In 2005, stakeholder pensions emerged as most popular form of single premium pension in bancassurance
  - Figure 21: Sales of single premium life products through the single-tie channel declined strongly in the last five years
  - Figure 22: The non-intermediated distribution channel sees largest sales in regular premium life sector
  - Figure 23: Single premium pensions represent the only product category where the single-tie channel has seen growth in 2005
  - Figure 24: Sales of regular premium pension products through the non-intermediated channel have shown an increase in 2005
  - Figure 25: Single outlet firms have increased significantly since 2005
  - Figure 26: Network members have significantly declined since 2003
  - Figure 27: Total IFA turnover increased by 9.6% between 2005 and 2006
  - Figure 28: Network members have seen a significant decrease in average turnover per firm since 2005
  - Figure 29: Sesame maintained its position as the largest UK IFA firm in 2006
  - Figure 30: Barclays has the largest branch network of all banks and building societies in the UK
  - Figure 31: HBOS is the dominant player in the UK bancassurance market
  - Figure 32: A number of non-traditional distributors have entered the UK financial services sector in the last 10 years
  - Figure 33: UK's major insurers are increasingly seeking to diversify their distribution strategies to reach a broader customer audience
  - Figure 34: UK's top 5 providers control almost 50% of the total UK life and pensions market
  - Figure 35: In terms of advertising, financial companies spend significantly more on life insurance than pension products
  - Figure 36: HBOS recorded highest sales of single premium life products in 2005
  - Figure 37: Legal & General recorded highest sales of regular premium life products in 2005
  - Figure 38: Aviva recorded highest sales of single premium pension products in 2005
  - Figure 39: Standard Life recorded highest sales of regular premium pension products in 2005
  - Figure 40: IFAs will remain the most dominant distribution channel in the UK in the next 5 years
  - Figure 41: Multi-tie advisors and multi-tie bancassurers will see the greatest increases in terms of sales in the next 5 years
  - Figure 42: The regular premium life market will see a slight decline in the next five years
  - Figure 43: SIPPs are expected to drive IFAs single premium pensions sales in the next five years
  - Figure 44: IFAs account for the vast majority of regular premium pensions sales
  - Figure 45: "Quasi-Delphi" forecasting technique