Report: Alternative Retirement Strategies - UK

Issues in the Market
Key issues
Scope of the report
Abbreviations
Market in Brief
The rigidity of pensions is a deterrent for some people
An ageing population is a major cause for concern in the UK...
...and tough economic conditions have hit investors
Pension contributions have fallen during the recession
- Figure 1: Total new premiums paid into individual and occupational pensions, 2003-08
Cash ISA subscriptions have grown strongly
- Figure 2: Amounts subscribed to ISAs, by cash and stocks and shares components, 2002/03-2008/09
Buy-to-let lending has dried up during the recession
- Figure 3: Number and value of new buy-to-let mortgage advances, 2000-09
The equity release market has held up relatively well
- Figure 4: Total value of new equity release sales by SHIP members, 1991-2009
Intermediaries dominate the BTL and equity release markets
Three fifths of people have non-pension potential retirement savings
- Figure 5: Overview of retirement income strategies among the non-retired population, June 2009
Internal Market Environment
Key points
Control and flexibility are key factors
Pensions are also seen as risky
A lack of trust prompts some to shun pensions
Working longer to fund retirement
The recession has forced some people to rethink plans
People are apathetic towards retirement planning...
- Figure 6: Reasons for not saving, June 2008
...prompting the government to launch a new scheme
Buy-to-let -- a sector in tatters...
...but the long-term trend is more positive
- Figure 7: Tenure structure of dwellings (index of number of dwellings, 1991=100), 1991-2007
- Figure 8: The annual rate of return on BTL (geared investment and cash purchase), Q1 2006-Q4 2008
Regulation is a burden for private landlords
Equity release also suffers from a trust shortfall...
...but tighter regulation should improve the industry' s image
Increasing IFA involvement in the sector
The popularity of ISAs continues to rise...
...but low interest rates and stockmarket volatility are an issue
A few key changes last year have simplified the ISA regime
- Figure 9: Recent and proposed changes to the ISA scheme, 2004-20
Efforts being made to speed up ISA transfers
Broader Market Environment
Key points
People are living longer...
- Figure 10: Cohort life expectancy at age 60, by gender, 1981-2056
...with the old age dependency ratio increasing as a result
- Figure 11: Projected size of the UK population, by age band, 2010-56
Benefits now account for less of total pensioner income...
- Figure 12: Breakdown in gross pensioner income (weekly average at constant prices, 2007-08), 1994/95-2007/08
...forcing many pensioners to work during their retirement
- Figure 13: UK economic activity, by gender and age, 2004-14
The low base rate is not good news for savers
- Figure 14: Base rate, January 2002-June 2009
House prices have tumbled in the recession...
- Figure 15: Average house prices, January 2002-June 2009 (monthly data, seasonally adjusted)
...as have global stock markets
- Figure 16: FTSE-100 and FTSE-All Share, daily values, January 2000-June 2009
Competitive Context: The Pensions Market
Key points
Pensions are the traditional way of saving for retirement
Contributions into individual pension schemes fell in 2008
- Figure 17: Total new premiums paid into individual and occupational pensions, 2003-08
SIPPs have grown increasingly popular
- Figure 18: New individual pension premiums, by product type, 2003-08
Occupational pension schemes are closing fast...
- Figure 19: Number of private sector occupational pension schemes, by status, 2006 and 2007
...with the decline seen mostly in the private sector
- Figure 20: Number of occupational pension scheme members, by sector, 1991-2007
SWOT Analysis
- Figure 21: Alternative retirement strategies -- SWOT analysis, 2009
Market Size
Key points
Sizing the pension alternatives
Cash ISA subscriptions have increased by 51% since 2002/03...
- Figure 22: Amounts subscribed to ISAs, by cash and stocks and shares components, 2002/03-2008/09
...while stocks and shares subscriptions have been more volatile
Turning emergency savings into retirement savings
Sales of collective investments have fallen in the downturn...
- Figure 23: Retail sales of unit trusts and OEICs by IMA members, 1998-2008
...with minimal net new sales
Buy-to-let lending has fallen sharply...
- Figure 24: Number and value of new buy-to-let mortgage advances, 2000-09
...with many lenders exiting the market
Signs that people are being forced to turn to equity release?
- Figure 25: Total value of new equity release sales by SHIP members, 1991-2009
Meeting a shortfall between income and expenditure
Brand Communication and Promotion
Key points
Adspend reflects dominant role of intermediaries
- Figure 26: Retirement planning-related advertising expenditure, by sub-category, 2007-09
The casualties of a slowdown
- Figure 27: Retirement planning-related advertising expenditure, top 20 companies, 2007-09
Intermediary press the key marketing channel
- Figure 28: Retirement planning-related advertising expenditure, by media type, 2007-09
Channels to Market
Key points
Bank staff and IFAs the key route to market
- Figure 29: Preferred sources of investment advice, April 2009
Within equity ISAs, fund supermarkets and tied agents dominate
- Figure 30: Gross retail sales of unit trust and OEIC ISAs, by distribution channel, 2004-08
Intermediaries dominate the BTL sector...
...as they also do in the equity release market
- Figure 31: Value of sales of equity release products by SHIP members, by distribution channel, 2003-08
Cash ISAs primarily sold direct
The Consumer -- Savings and Pension Ownership
Key points
An overview of retirement savings among the non-retired population
- Figure 32: Overview of retirement income strategies among the non-retired population, June 2009
Alternative retirement strategies are more likely to be pursued by pension holders
- Figure 33: Overview of different financial products owned, June 2009
Ability to save is governed by age and income
- Figure 34: Potential retirement strategies, by key demographics, June 2009
Alternative retirement funding -- the preserve of the wealthy
- Figure 35: Non-pension retirement savings, by key demographics, June 2009
Multiple product ownership increases among third agers
- Figure 36: Repertoire of number of financial products owned, June 2009
Alternative retirement products sit alongside more traditional products
- Figure 37: Cross-analysis of product ownership, June 2009
The Consumer -- Retirement Expectations
Key points
Retirement expectations are fairly mixed
- Figure 38: Financial expectations at retirement, June 2009
Retirement expectations change with age and affluence
- Figure 39: Financial expectations at retirement, by key demographics, June 2009
Property income boosts retirement expectations
- Figure 40: Retirement product ownership, by financial expectations at retirement, June 2009
Multiple product ownership raises retirement expectations
- Figure 41: Financial expectations at retirement, by repertoire of number of financial products owned, June 2009
State pension age is still the goal for the majority
- Figure 42: Retirement plans, June 2009
Third agers face up to retirement reality
- Figure 43: Retirement plans, by key demographics, June 2009
Alternative retirement plans provide flexibility
- Figure 44: Retirement product ownership, by retirement plans, June 2009
A gap in retirement planning
- Figure 45: Retirement plans, by financial expectations at retirement, June 2009
Appendix -- Market Background and Definitions
Pension-based retirement planning
- Figure 55: Types of private pension provision in the UK
Occupational schemes
Individual pensions
Group pensions
Benefit structures
Other definitions
Non-pension-based retirement planning
ISAs
Buy-to-let
Equity release
Investment bonds from life companies
Collective investments
National Pension Savings Scheme
Qualifying schemes
Implementation
Appendix -- Competitive Context (The Pensions Market)
- Figure 56: Number of private sector occupational pension schemes in the UK, by scheme size, 2002-07
Appendix -- The Consumer -- Savings and Pension Ownership
- Figure 57: Repertoire of number of financial products owned, by demographics, June 2009

Alternative Retirement Strategies - UK - September 2009

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