UK Individual and Group Pensions 2009

Table of Contents

OVERVIEW

• Catalyst
• Summary

EXECUTIVE SUMMARY

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
  • New SIPP powers to hold protected rights will increase flexibility and investment choice for consumers
  • 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
• 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 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'

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
  • Standard Life dominates the regular premium pensions market in 2008
• 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
• 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
  • ABI definitions of distribution channels
• Further reading
• Ask the analyst
• Datamonitor consulting
• Disclaimer

TABLES

• Table: Forecasts single premium pensions new business, £m annual premium equivalent (APE), 2009 - 13
• Table: Forecast regular premium pensions new business, £m APE, 2009 - 13
• Table: Single premium pensions new business for the top 10 pensions companies 2008, £m APE
• Table: Regular premium pensions new business for the top 10 pensions companies 2008, £m APE
• Table: Total single and regular premium pensions new business by distribution channel, £m APE, 2004 - 08
• Table: How do you see business in each of the following areas changing over the next six months?
• Table: Forecast single and regular premium pensions new business by distribution channel, £m APE, 2009 - 13
• Table: Single premium pensions new business premiums £m APE, 2004 - 08
• Table: Regular premium pensions new business premiums, £m APE, 2004 - 08
• Table: How do you rank the following companies in terms of their overall service?

FIGURES

• Figure: Personal pensions and SIPPs still dominate single premium pension sales in 2008
• Figure: The regular premium pensions market saw slender growth in 2008
• Figure: SIPP products will rise in popularity over the next five years
• Figure: Group personal pensions are forecasted to dominate the regular premium pensions market
• Figure: Pressure on the working age population is increasing as more people begin to retire
• Figure: Longer life expectancies are producing growth in the number of older people in the UK
• Figure: Affordability is a strong barrier against saving for a pension
• Figure: Prudential dominates the single premium pensions field, with the highest market share by percentage in 2008
• Figure: The majority of advisors view Prudential as a financially stable life company
• Figure: Standard Life heads the group of leading regular premium pension providers, with the highest market share by percentage in 2008
• Figure: Standard Life effectively employs use of celebrity to promote its ' Active Money' SIPP
• Figure: The accumulators are a significant part of the population in the UK
• Figure: Lincoln Financial Group offers a gentle reminder to consumers of the future challenges they may face in their lifetime
• Figure: IFAs dominate the distribution of pension products
• Figure: Advisors believe pension business will see an increase over the next six months
• Figure: IFAs will continue to be the predominant distribution channel in the pensions market