Report: The Future of UK Investment Bonds 2009 TOC

The total single premium life market grew slightly over the last five years
Providers should highlight the attractiveness of investment bonds in retirement planning
Wrap platforms are an important technology for the distribution of investment bonds

Introduction to the investment bond product
- An investment bond is a life assurance policy primarily structured as in investment
- The ‘guaranteed bond' category is a classification introduced by the ABI in 2008

The single premium life market will contract initially before seeing growth
- Provider ability to supply guaranteed bonds will cause sales of guaranteed bonds to decline in 2009
- Sales of unit-linked bonds will decline as consumers demand liquidity and elements of protection against market volatility
- The market for money market bonds will contract over the next five years
- Future sales of with-profit bonds will rise while sales of distribution bonds fall in tandem

Providers should put efforts into making consumers aware of the nature of risk and its link to return
- Consumers are risk averse and shunning equity-based investments
- Consumers lack confidence in equity-based products and are seeking safe haven in cash accounts
- Investment bonds also need to attract to the cautious and less affluent consumer

Regulatory issues are impacting upon the distribution of investment bonds
- The TCF initiative aims to create a more efficient and effective market
- TCF will help investors be better informed about the risks associated with investment bonds
- High commissions and poor quality of advice on the part of advisors are concerns in the investment bond market
- The RDR aims to increase consumer access to financial products and services through offering a dual system of financial sales and advice

Providers should highlight investment bonds as an alternative retirement strategy to revive sales
- Investment bonds offer flexible retirement planning strategies for those approaching retirement
- A bond is also an efficient investment for inheritance tax planning
- Investment bond providers should target those approaching retirement who want to secure their retirement ambitions
- The rapidly ageing and increasingly affluent UK population is a potential key market

Providers have produced innovations to suit the risk-averse nature of today' s investors
- Providers have made attempts to satisfy the demand for guarantees and capital protection by risk wary customers
- However, providers have found it difficult to protect itself against the risk of guarantees becoming too onerous

Providers have put efforts towards supporting IFAs to make correct and decisive decision-making for their clients
AIG writes the highest in new business premiums in the investment bond market
- AIG comes top of competitor rankings in the investment bond market despite recent negative press
- AIG has been at the forefront of product innovation

Distribution of investment bonds remains focused on the IFA channel
- IFAs are the dominant distribution channel for investment bonds

Advisors are increasingly distributing non-unit linked bond products and shying away from unit-linked bonds
- Unit-linked bond distribution is moving away from IFAs
- Non unit-linked bond distribution through IFAs has grown rapidly sharply

The use of wrap technology by advisors will be a prominent driver of the UK investment bond market
- The right wrap proposition will improve an IFA' s client service and profitability
- The emergence of IFA-developed wraps is blurring the boundary between manufacturer and distributor
- Advisors are not keen to embrace technological advances

Table: Single premium life market, new business premiums 2004-2008, £m APE
Table: Forecast single premium life market, new business premiums 2009-2013, £m APE
Table: The top 20 investment bond competitors, new business premiums 2008, £m APE
Table: Single premium life market, new business premiums segmented by distribution channel, £m APE
Table: Unit linked bond distribution 2004-2008, £ million APE
Table: Non-unit-linked bond distribution 2004-2008, £ million APE
Table: How interested would you be in any of these online services from a product provider?

Figure: The total single premium life market grew by 4% between 2004 and 2008 but saw a sharp decline in 2008
Figure: The market for investment bonds will suffer further declining sales in 2009
Figure: The accumulators are a significant part of the population in the UK
Figure: Pressure on the working age population is increasing as more people begin to retire
Figure: AIG was the top investment bond provider in 2008
Figure: IFAs are the main distribution channel for investment bonds
Figure: IFAs' share of unit-linked bond distribution continues to fall in 2008
Figure: Non-unit-linked bonds are distributed more by IFAs
Figure: IFAs do not show an interest in support services using new technology

The Future of UK Investment Bonds 2009