UK Life and Pensions Distribution Overview 2008

Table of Contents

• Overview
  • Catalyst
  • Summary
• Table of Contents
• Table of figures
• Table of tables
• Retail Distribution Review
  • The key elements of the RDR
    • Improved clarity of services was a key aim of the RDR
    • Remuneration will become less open to influence by providers
    • Standards of professionalism in the industry will be improved
  • The RDR development process continues
  • Responses to the RDR have been mixed
    • Key criticisms of the RDR are that it hasn' t fulfilled the clarity it promised to deliver
  • Datamonitor view of the RDR reforms
• Product Distribution through the IFA CHannel
  • The IFA channel accounts for nearly half of total life and pensions sales in the UK
  • The total regular premium life market has declined by a compound annual rate of 9%
    • Term assurance dominates regular premium life sales by IFAs
    • The market for endowments has collapsed
    • Savings-related term has withstood market pressures, despite mortgage-related sales being strongly impacted by the housing market
  • Total single premium life market has grown by an annual compound rate of 24.1%
    • Unit-linked bonds dominate the single premium life market for IFAs, although there has been strong growth in guaranteed bonds
      • Guaranteed bonds have grown in popularity with IFAs, fuelled by withdrawals from equity investments
  • Personal pensions dominate the pensions market in terms of new business from IFAs
    • SIPPs continue to be the most popular pensions product among IFAs
      • Despite the dominance of personal pensions, SIPPs have experienced the most impressive year-on-year growth over the last five years
      • A clear definition of SIPPs is necessary to ensure that IFAs do not sell an incorrectly defined product
      • Appropriate segmentation and targeting of SIPPs can help IFAs boost take-up and retention
  • The financial advisor channel is forecast to remain dominant going forward
    • Sales of savings-related term assurance by IFAs is forecasted to dominate the regular premium life market
      • Differing views exist as to the impact of the economic downturn on protection sales
    • Datamonitor forecasts unit-linked bonds to continue their lead in single premium life sales by IFAs, although guaranteed bonds will increase in popularity
      • Guaranteed bonds are positively impacted by their guarantee element and CGT changes
    • Group personal pensions are forecasted to dominate the regular premium pensions market
    • The market will increasingly be shaped by SIPP products at the expense of stakeholder and personal pensions
• Product Distribution through Bancassurance
  • The bancassurance channel has failed to challenge the dominant IFAs
  • The current bancassurance single premium life market is dominated by unit-linked and guaranteed bonds
    • Unit-linked bond products complement the bancassurance model with their simplicity
    • Bancassurance is growing stronger in guaranteed bonds fuelled by withdrawals from equity investments
  • Regular life premiums for bancassurers have been adversely affected by the mortgage crisis
    • The collapse of the endowment market has taken its toll on regular premiums
    • Savings-related term has withstood market pressures, despite mortgage-related sales being impacted by the housing market
    • IP and CII premiums have also suffered although they account for a very small percentage of bancassurers' regular life business
    • Bancassurers have not been able to increase their pensions business over the last 5 years
      • Single premium income has been helped by the increasing popularity of SIPPs and bancassurers have taken their share
      • Stakeholder pensions dominate the bancassurers' single and regular premium pensions income
• APPENDIX
  • Product definitions
    • Life-based savings products
    • Life assurance
    • Single premium life
    • With-profit bond
    • Unit-linked bond
    • Income and growth bonds
    • Guaranteed equity bonds
    • Distribution bonds
    • Purchased life annuities
    • Other bonds
    • Annual premium life
    • Endowment policy
    • Whole of life insurance
    • Term assurance
    • Income protection
    • Critical illness
    • Collective life
    • ISAs
    • Personal pensions
    • Stakeholder pensions
    • Group personal pensions (GPPs)
    • DSS rebates
    • Employer-sponsored stakeholder pension (ESS)
    • SIPPs (Self Invested Personal Pensions)
    • FSAVC (Free-Standing Additional Voluntary Contributions)
  • ABI definitions of distribution channels
    • Independent financial advisors (IFAs)
    • Direct sales forces
    • Tied agents
    • Multi-tied agents
    • Bancassurance
    • Direct marketing
    • Telesales
    • Other
  • Further reading
  • Ask the analyst
  • Datamonitor consulting
  • Disclaimer
• List of Tables
  • Table 1: Total life and pensions new business by distribution channel, £m APE
  • Table 2: Total regular premium life new business premiums segmented by distribution channel, £m APE
  • Table 3: Regular premium life sales by IFAs, £m APE
  • Table 4: Total single premium life sales segmented by distribution channel, £m APE
  • Table 5: Single premium life sales through the IFA channel, £m APE
  • Table 6: Regular premium pension sales by IFAs, £m APE
  • Table 7: Single premium pension sales by IFAs, £m APE
  • Table 8: Forecast total life and pensions sales by distribution channel, 2008-2012, £m APE
  • Table 9: Forecast regular premium life market new business premiums, 2008-2012, £m APE
  • Table 10: Forecast single premium life market new business premiums, 2008-2012, £m APE
  • Table 11: Forecast regular premium pensions new business premiums through IFAs, 2008-2012, £m APE
  • Table 12: Forecast single premium pensions new business premiums, 2008-2012, £m APE
• List of Figures
  • Figure 1: FSA diagram of new investment distribution framework
  • Figure 2: Financial advisors dominate the sale of life and pensions products
  • Figure 3: Protection and mortgage-related term dominate regular premium life sales through the IFA channel
  • Figure 4: Unit-linked bonds account for 59% of total single premium life sales through the IFA channel
  • Figure 5: Group personal pensions dominate sales by IFAs in the regular premium market
  • Figure 6: Personal pensions continued to dominate the single premium pensions market in 2007
  • Figure 7: The regular premium life market will see slender growth over the next five years
  • Figure 8: Unit-linked bonds will still command single premium life sales by IFAs over the next five years
  • Figure 9: Regular pensions sales through IFAs will rise by a compound rate of 6% between 2008 and 2012
  • Figure 10: The single premium pensions market through IFA sales will remain static between 2008 and 2012
  • Figure 11: Bancassurers' mix of life and pensions business has not gained momentum
  • Figure 12: Bancassurers have focused their sales efforts on unit-linked and guaranteed bonds
  • Figure 13: The mortgage crisis has taken its toll on regular premiums sold through bancassurers
  • Figure 14: Banks have not been able to increase their share of the pensions market between 2003-2007
  • Figure 15: SIPPs and stakeholder pensions are the two most important single premium pension income generators for bancassurers
  • Figure 16: Stakeholder pensions dominate the bancassurers' regular premium income in 2007