UK Individual and Group Pensions 2009

Publication Date	July 2009
Publisher	Datamonitor
Product Type	Report
Pages	59
ISBN Number	not applicable
Product Code	DAT07177

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Summary

This report provides a comprehensive analysis of the individual pensions market, sizing the market for individual pension products, as well as providing insight into the distribution dynamics in the market. The report gives focus on how providers and the pensions industry as a whole can boost pension savings amid the government's discussion of personal accounts to the individual pensions market.

Scope

Examines the current shape of the individual pensions market and explores factors that are currently limiting the sale of pensions products
Comprehensive analysis of key products and regulatory trends affecting the pensions market in 2009
Assesses the strategies to combat key barriers to save for pension provision with particular focus on market conditions and demographics

Highlights

The dominance of personal pensions in the individual pensions market has been overshadowed by the rise in popularity of SIPP products. Despite the strong prevalence of personal pensions in terms of both single and regular premium pensions new business, SIPPs have experienced the most impressive year-on-year growth over the last five years.

A great deal of uncertainty surrounds the future of personal pensions and stakeholder markets and much of its progression will also depend on the effects of the government's plans for personal accounts in potentially drawing investors away from these pension products.

Reasons to Purchase

Provides detailed analysis of developments in the individual pensions market such as personal accounts
Access Datamonitor's forecasts for the future market size of the UK Pensions market
Identify competitor innovations and dynamics, and changes taking place in the distribution dynamics of the market

Content

Overview

Catalyst

Summary

EXECUTIVE SUMMARY

Table of figures
Table of tables

THE FUTURE OF THE UK PENSIONS MARKET

Introduction
Personal pensions and SIPPs continue to dominate the pensions market
The rise and rise of SIPPs have been subdued by the state of the economy
The regular premium market saw slight growth amid economic turmoil
The group personal pensions market has seen healthy growth over the past five years
Investor desire for self-control has been a driver for choice of product
Distributing SIPPs on an efficient wrap platform will give investors increased tax-efficiency and convenience
New SIPP powers to hold protected rights will increase flexibility and investment choice for consumers
Greater clarity of SIPPs is needed to prevent a mis-selling scandal
The increasing interest in SIPPs does not necessarily signal an end for personal and stakeholder pensions
Group personal pensions may play a key role in pensions beyond the introduction of Personal Accounts in 2012
Group SIPPs are expected to flourish, but their emergence should be treated with caution
The group SIPP market offers members a flexible and engaging product, with a range of investment options tailored to suit the different needs of members
There remain differences of opinion in the industry about the group SIPP product
Industry views of a group SIPP proposition depend on the provider's existing market
Most people are not well equipped to deal with the costs and risks involved in private pension provision
People must be able to separate the concepts of building up a pension fund and receiving pension income
Individuals are increasingly on their own in planning for retirement and need to understand the risks that they will shoulder
The universally accepted belief that over the long term equities deliver good private pensions may be in question
Demographic trends are making pension savings a necessity
People need to save for their retirement, but they are hindered by the perception of affordability
People are not prepared to take on higher pension savings during a market downturn
People need to be educated about striking the right balance between short- and long-term savings
Affordability and short-term views act as compound barriers to pension savings
People are not saving for the future, assuming they will be looked after by the buckling state system
Government reforms will not do enough to help individuals save for retirement
Individuals face bigger burdens on private savings to produce good pensions
The government hopes that Personal Accounts will address the problems of long-term retirement savings
Personal Accounts are unlikely to hit the target
The government is continually showing a lack of continuity on pension policy, undermining its importance
Public-sector pension reform is a slow and controversial process and may not boost pension savings
Leveling down employers' contribution through the Personal Accounts scheme will make pension provision worse
Employers may be tempted to minimize costs of Personal Accounts through lower employee salaries
However, a contributions ceiling has been set to prevent the weakening of existing pensions provision
The government should still ensure that it pays to save against the impact of means-testing
The government and industry must put more personal responsibility on consumers regarding retirement planning
The effectiveness of Personal Accounts is uncertain, and the market is becoming increasingly polarized between stakeholder and SIPP pensions
The pensions market faces regulatory changes from the Retail Distribution Review
The RDR will increase the quality of advice and promote transparency of charges in retirement planning
The RDR initiative aims to address current market failures
The latest proposal outlines a clear distinction between 'sales' and 'advice'
Customer-agreed remuneration will allow competitive forces to work in favor of consumers
Providers should take note of the need for a money guidance service for greater consumer access to retirement planning tools
The FSA alleges that many consumers may have been given the wrong pensions advice

THE FUTURE OF PRODUCT INNOVATION IN PENSIONS

Prudential and Standard Life head the competition in the pensions market
Prudential sits at the top spot in the single premium pensions market
Much of Prudential's strength comes from its launch of PruFund and PruSelect in late 2008
Prudential regularly reviews its business processes throughout market turmoil and has come out with positive perceptions from IFAs
Prudential has maintained IFAs' confidence in its financial stability
Standard Life dominates the regular premium pensions market in 2008
Standard Life offers customer-relevant solutions to address tough market conditions
Standard Life has created strong customer-focused brand platforms that engage its audience through the 'Active Money' SIPP
Innovative strategies from providers must address people's barriers to save
Affordability is a great concern amongst non-savers
Variable annuities can increasingly becoming part of a retirement and investment plan
Targeted marketing, rather than new product development, must be the focus
Providers and advisors should encourage people to exercise personal responsibility
Those who do not have a route into a pension scheme can always look into alternatives to pension saving
Individual Savings Accounts
Venture Capital Trusts
Property
Providers should target those approaching retirement who want to secure their retirement ambitions
Accumulators are aged between 50 and 59, but have lifestage complexity
Accumulators want their individual needs recognized with a personal service and are attracted to convenience
Providers should reward accumulators to incentivize this segment to save
Providers should also target those with aspirations of accumulating wealth
The pensions industry is missing the opportunity to harness the aspirer market
Connecting to the world and having a sense of belonging appeals to aspirers
Aspirers are increasingly seeking a purchase experience that is efficient and convenient
Providers should establish early relationships with aspirers to gain business when they accumulate wealth

THE FUTURE OF PENSIONS DISTRIBUTION

IFAs are well-established in the pensions market, but many are shifting their focus up-market
IFAs perceive that pensions will prove to be less difficult to sell than other products
IFAs will play a crucial role in the new pensions era
Regulatory changes to distribution represent a particular challenge to the sale of SIPPs
Online distribution remains a promising area in the individual pensions market
Wrap platforms may soon reach a proliferation peak

APPENDIX

Data
Definitions
Single premium policy
Regular premium
New business
Life-based savings products
In-specie contribution
Pension product definitions
Personal pensions
Stakeholder pensions
Group personal pensions (GPPs)
DSS rebates
Employer-sponsored stakeholder pension
Self-invested personal pensions (SIPPs)
ABI definitions of distribution channels
Independent financial advisors (IFAs)
Direct sales forces
Tied agents
Multi-tied agents
Bancassurance
Direct marketing
Other
Further reading
Ask the analyst
Datamonitor consulting
Disclaimer
Table 1: Forecasts single premium pensions new business, ??m annual premium equivalent (APE), 2009-13
Table 2: Forecast regular premium pensions new business, ??m APE, 2009-13
Table 3: Single premium pensions new business for the top 10 pensions companies 2008, ??m APE
Table 4: Regular premium pensions new business for the top 10 pensions companies 2008, ??m APE
Table 5: Total single and regular premium pensions new business by distribution channel, ??m APE, 2004-08
Table 6: How do you see business in each of the following areas changing over the next six months?
Table 7: Forecast single and regular premium pensions new business by distribution channel, ??m APE, 2009-13
Table 8: Single premium pensions new business premiums ??m APE, 2004-08
Table 9: Regular premium pensions new business premiums, ??m APE, 2004-08
Table 10: How do you rank the following companies in terms of their overall service?
Figure 1: Personal pensions and SIPPs still dominate single premium pension sales in 2008
Figure 2: The regular premium pensions market saw slender growth in 2008
Figure 3: SIPP products will rise in popularity over the next five years
Figure 4: Group personal pensions are forecasted to dominate the regular premium pensions market
Figure 5: Pressure on the working age population is increasing as more people begin to retire
Figure 6: Longer life expectancies are producing growth in the number of older people in the UK
Figure 7: Affordability is a strong barrier against saving for a pension
Figure 8: Prudential dominates the single premium pensions field, with the highest market share by percentage in 2008
Figure 9: The majority of advisors view Prudential as a financially stable life company
Figure 10: Standard Life heads the group of leading regular premium pension providers, with the highest market share by percentage in 2008
Figure 11: Standard Life effectively employs use of celebrity to promote its 'Active Money' SIPP
Figure 12: The accumulators are a significant part of the population in the UK
Figure 13: Lincoln Financial Group offers a gentle reminder to consumers of the future challenges they may face in their lifetime
Figure 14: IFAs dominate the distribution of pension products
Figure 15: Advisors believe pension business will see an increase over the next six months
Figure 16: IFAs will continue to be the predominant distribution channel in the pensions market