UK At-retirement Market 2007

Table of Contents

• CHAPTER 1 EXECUTIVE SUMMARY
  • Market Focus
  • Sector Issues
  • Competitor Issues
  • Distribution Dynamics
• CHAPTER 2 INTRODUCTION
  • What is this report about?
  • Who is the target reader?
  • How to use this report
• CHAPTER 3 MARKET FOCUS
  • Introduction
  • Key findings
  • Historic Data
  • Key Products
    • Pension annuities are the leading retirement product
    • Fixed-rate annuities are less flexible
    • Index-linked annuities can be pricey
    • Investment-linked annuities are only a small part of the total market
    • Open annuities offer a lump sum at death
    • The purchased life annuities market is under-developed
    • Value-Protected annuities provide protection of capital
    • Enhanced annuities are a growing market
  • Alternative products
    • Income drawdown is a popular alternative when the annuity market is unfavourable
      • Strengths of income drawdown
      • Weaknesses of income drawdown
    • Alternatively Secured Pensions are a controversial topic
    • Trivial Commutation is unlikely to affect large numbers of people
    • Hybrid annuities offer more flexibility and are likely to develop fast
    • The equity release market has recently seen strong growth
      • Strengths of equity release
      • Weaknesses of equity release
  • Trends and Drivers
    • Life expectancy is the single most pressing issue affecting the UK annuity market
      • Changes in attitude and greater awareness has contributed to an increase in longevity
      • Increased longevity makes annuities more expensive
    • Interest rates have an impact on annuity rates
    • A-Day has had a negative effect on annuity rates
    • Customer attitudes are changing slowly, but education is paramount
  • Regulation
    • ASP is the most controversial issue in the at-retirement market in 2007
    • UCITS III has had a positive impact on the market
    • The European Age Discrimination directive will impact product development
    • A-Day has led to increased sales of alternative products such as income drawdown
    • The majority of providers believe more legislation is necessary
• CHAPTER 4 SECTOR ISSUES
  • Introduction
  • Key findings
  • Key Issues
    • Consumer confidence has been affected by government indecision
    • The U-turn on ASP is likely to have a positive effect on the annuity market
    • The ASP is not the Holy Grail
    • Trivial commutation is unlikely to have a big impact
  • There is an over-reliance on property in retirement portfolios
    • Equity release is becoming increasingly popular
      • 1) Lifetime Mortgages
      • 2) Reversion Schemes
      • Equity release is primarily sold through intermediaries
  • Strategic Issues
    • Life expectancy is changing annuity pricing structures
    • Consumers are moving towards more diversified alternatives
  • Resolution of Issues
    • Flexibility is important to maintain a steady income
    • Providers must place more of a priority on the annuity business
• CHAPTER 5 COMPETITOR ISSUES
  • Introduction
  • Market share
  • Recent Product Developments
  • The UK market remains dominated by a number of leading annuity providers
    • Scottish Widows is one of the UK' s most recognized brands
    • Legal & General is one of the foremost UK insurance companies
    • Prudential is a leader in the UK retirement market
    • Standard Life is one of the largest UK provider of pensions in the UK
    • Norwich Union sales were boosted by A-Day
    • Friends Provident targets wealthy customers
      • Retirement investment plan
  • New entries into the UK at-retirement market
    • Metlife is one of the USA' s largest insurers
    • Just Retirement focuses only on retirement products
    • Living Time attempts to offer more flexible products
    • Aegon Scottish Equitable saw high levels of growth in 2006
    • Hartford is the largest global provider of investment bonds
  • Innovation is growing in the at-retirement market
    • Metlife have introduced a ' unique' new product
    • New entrants are driving growth in the non-convential arena
  • Income Drawdown is still dominated by three major players
    • Prudential, Scottish Widows and Standard Life are the key providers in the income drawdown market
      • Prudential
      • Scottish Widows
      • Standard Life
  • The equity release market is growing
    • The equity release market is no longer dominated by the two giants
      • New entrants are vying for a position in the market
      • Product innovation is growing
      • Distribution is key
• CHAPTER 6 DISTRIBUTION DYNAMICS
  • Introduction
  • Key findings
    • Independent intermediaries account for around 70% of pension annuities business
    • Independents also dominate the income drawdown market
    • Increase in competition due to high margins for annuity business
    • FSA review of distribution may be a catalyst for change
    • But IFAs will play a crucial role in the new retirement era
• CHAPTER 7 APPENDIX
  • Definitions
    • Asociation of British Insurers definitions of products
      • Pension annuities
      • Income drawdown
    • Association of British Insurers definitions of distribution channels
      • Independent Financial Advisers (IFAs)
      • Direct sales forces
      • Tied agents
      • Multi-tied agents
      • Bancassurance
      • Direct marketing
      • Telesales
      • Other
    • Other definitions
      • Additional Voluntary Contributions (AVCs)
      • Annuity
      • Defined contribution pension scheme
      • Defined benefits pension scheme
  • Research methodology
  • Future readings
    • Life and Pensions SPP
      • Interactive Databases
      • Reports and Briefs
    • Financial Advice Market SPP
  • SPP writing team
  • How to contact experts in your industry
  • List of Tables
    • Table 1: Pension Annuities in Force, 1995-2006
    • Table 2: Total new premiums, 2002-2006
    • Table 3: The UK Income Drawdown Market 2004-2006
    • Table 4: The UK Annuity Market, 1994-2005
    • Table 3: Annuities with-profits, total business 2005
    • Table 4: Non-profit annuities, total business 2006
    • Table 5: Non-profit impaired life annuities, total business 2006
    • Table 8: Pension annuities sales 2002-06, split by distribution channel
    • Table 9: Income drawdown sales 2002-06, split by distribution channel
  • List of Figures
    • Figure 1: UK At-Retirement 2007: Available Briefs
    • Figure 2: Annuities can be used to provide a level or increasing income
    • Figure 3: Life expectancy in the UK has reached record levels
    • Figure 4: Women are living almost 20 years longer at age 65
    • Figure 5: Income drawdown sales increased significantly in Q2 2006 as the price fell