UK Individual Pensions 2008

Content

• Overview
  • Catalyst
  • Summary
  • Executive Summary
  • Table of figures
  • Table of tables
• SPECIAL FEATURE: GETTING TO GRIPS WITH PENSION SAVINGS
  • The UK government is failing to boost pension savings leaving providers to fill in the gap
  • Providers can seize opportunities where the government has failed
  • The government hopes that personal accounts will address the problem of long-term retirement savings
  • The public sector pension reform is a slow and controversial process and may not boost pension savings
  • Government focus will renew interest in pension savings helping providers as well
  • There are doubts as to whether personal accounts will hit the target
  • The government is continually showing a lack of continuity on pension policy, undermining its importance
  • Leveling down employers' contribution will make pension provision worse
  • The government should still ensure that it pays to save against the impact of means-testing
  • 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 effectiveness of personal accounts is uncertain and the market continues to polarize between stakeholder and SIPP pensions
  • Providers can win new business in the middle market with SIPPs
  • Offering low-cost SIPPs presents an opportunity
  • Low-cost and vanilla SIPPs will meet the needs of the 'recessionary consumer'
  • New SIPP powers to hold protected rights will increase flexibility and investment choice for consumers
  • However, a SIPP mis-selling scandal may come to pass if greater clarity is not introduced to the market
  • Recent economic troubles may prove disastrous for SIPPs
  • Providers can capitalize further from SIPPs by distributing them on an efficient wrap platform
  • The increasing interest in SIPPs does not necessarily signal an end for personal and stakeholder pensions
  • Providers should focus on a more relevant retirement planning system by addressing market conditions and demographics
  • A more flexible retirement planning program is needed to make the pensions industry more viable and sustainable
  • Current property and equities market presents huge buying opportunities for starting a pension
  • Variable annuities are increasingly becoming part of a retirement and investment plan
  • Combining variable annuities with a SIPP will give investors an ideal balance for their retirement strategy
  • There are currently alternatives to pension saving, the choice of which is dependent on investor attitude and preferences
  • Individual savings accounts
  • Venture capital trusts
  • Provider strategies for product diversification and redesign need to be examined to address the barriers to save
  • Affordability is an obstacle amongst most non-savers
  • Targeted marketing, rather than new product development, must be the focus
  • Providers and advisors should support people to exercise personal responsibility
  • People should be encouraged with a long-term view of pension savings
  • Providers should take note of the need for a 'Money Guidance' service for greater consumer access to retirement planning tools
  • Providers must communicate with advisors more readily
• MARKET CONTEXT
  • The dominance of personal pensions has been overshadowed by the rise of SIPPs
  • Despite the dominance of personal pensions, SIPPs have experienced the most impressive year-on-year growth over the last five years
  • SIPPs continue to be the most popular product in the regular premium pension market
  • Investor desire for self-control has been a driver for choice of product
  • A clear definition of SIPPs is necessary to ensure that distributors do not sell an incorrectly defined product
  • Group SIPPs are expected to flourish but their emergence should be approached 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
  • IFAs are the dominant distribution channel for pension products
  • IFAs are well-established in the pensions market but many are shifting their focus up market
  • SIPPs require a clear and transparent charging structure to engage with changing regulatory requirements
  • Online distribution remains a promising area in the individual pensions market
  • Wrap platforms may soon reach a proliferation peak
  • The RDR is the main piece of distribution regulation in the market
  • 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
  • AEGON heads the competition in the single and regular premium pensions market
  • AEGON dominates the pensions market in both the single and regular premium pensions in 2007
  • The company has secured distribution deals to increase market share
  • AEGON has combined its individual and corporate pensions businesses
  • AEGON has achieved numerous awards in 2008
  • Many competitors have focused their energy on their SIPP offerings
  • Prudential has brought a new flexible SIPP to the market in partnership with Cofunds
  • Standard Life allows SIPPs to access its FundZone fund supermarket
  • Standard Life has also committed resources towards helping advisors with SIPPs
  • An increasing number of non-insured SIPPs from non-life companies are in force in the market
  • Hargreaves Lansdown has become a leading non-life SIPP provider with its Vantage SIPP
  • A J Bell has put significant attention towards SIPPs and offers three plans to investors
  • Market forecasts
  • SIPP products will shape the pensions market at the expense of stakeholder and personal pensions
  • Group personal pensions are forecasted to dominate the regular premium pensions market
• 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
  • DSS rebates
  • Employer sponsored stakeholder pension (ESS)
  • SIPPs (self invested personal pensions)
  • 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
• List of Tables
  • Table 1: Single premium pensions new business, m APE, 2003-07
  • Table 2: Regular premiums pensions new business, m APE, 2003-07
  • Table 3: Forecast single premium pensions new business, m APE, 2008-12
  • Table 4: Forecast regular premium pensions new business, m APE, 2008-12
  • Table 5: Total single and regular premium pensions new business by distribution, m APE, 2003-07
  • Table 6: Single premium pensions new business for the top ten life companies, m APE, 2003-07
  • Table 7: Regular premium pensions new business for the top ten life companies, m APE, 2003-07
• List of Figures
  • Figure 1: Advisors desire more communication with providers
  • Figure 2: Personal pensions and SIPPs dominate single premium pension sales in 2007
  • Figure 3: SIPPs have experienced a CAGR of 203% in the regular premium pensions market
  • Figure 4: IFAs dominate the distribution of pension products
  • Figure 5: The market for single premium pensions is dominated by AEGON
  • Figure 6: AEGON heads the group of leading regular premium pension providers in 2007
  • Figure 7: The SIPPs market will see a slight increase in non-insured SIPPs business over the next five years
  • Figure 8: The single premium pensions market is forecast to remain static over the next 5 years
  • Figure 9: Regular pensions sales will rise by a CAGR of 6% between 2008 and 2012