Table of Contents
- Issues in the Market
- Key issues
- Market background and definitions
- Overview of sources of financial advice
- Figure 1: Different sources of financial advice
- Depolarisation -- providing more choice
- Figure 2: Overview of depolarisation
- High street banks since depolarisation
- HSBC and Barclays commit to multi-tie model
- Others focus on their own bancassurance operations
- Pension products
- Annuity-related terms and definitions
- Figure 3: Overview of the annuity and retirement income market
- Common product types
- Single or joint life
- Cash lump sum
- Open market option
- Alternatives
- Pensions simplification and income drawdown
- Alternatively secured pensions
- Abbreviations
- Market in Brief
- The intermediary marketplace
- Figure 4: Number of FSA directly authorised retail intermediary firms,
by primary category, January 2006-September 2008
- Internal market environment
- Regulatory developments
- Long-term economic and demographic trends favourable
- Overview of individual pension and retirement income distribution
- New individual and group pension business slows in 2008
- 80% of new individual pension APE premiums sold through IFAs
- Figure 5: New APE* premiums into individual pensions, by type of pension
and distribution channel, 2008 (est)
- £7.2 billion in new annuity business generated by IFAs in 2008
- Key IFA research survey results
- Client advice and expectations
- Prospects and future business intentions
- Opinions on legislation
- Internal Market Environment
- Key points
- Occupational pension provision on the decline
- Figure 6: Status of private and public sector schemes, 2007
- More people will have to make their own pension arrangements
- Past mistakes hold advice market back
- Just a quarter of consumers believe financial advisers have their
customers' best interests at heart
- Figure 7: Agreement with statements about savings and investment advice,
December 2008
- IFAs account for 12% of FOS complaints...
- Figure 8: Financial services firms complained about, by sector, 2006/07
- ... with only 5% of complaints regarding pensions advice
- Figure 9: IFAs -- Wwhich products were complained about, 2006/07
- FOS smaller firms' taskforce
- FSA claims that many may have been given wrong pension advice
- Affordability is preventing many from contributing to a pension
- Figure 10: Reasons for not saving, June 2008
- Consumer apathy also a significant barrier
- Psychological barriers also persist
- Increasingly complex products make getting advice essential
- The imminent arrival of Personal Accounts in 2012...
- ...with a number of residual effects
- Many retirees unaware of their at-retirement options
- More consumers browsing the internet for information on finance
- Indemnity cover and regulation hits IFA' s bottom line
- Broader Market Environment
- Key points
- Improving longevity means longer retirements
- Figure 11: Cohort life expectancy at age 60, by gender, 1981-2054
- More time spent in retirement but less money to fund it
- Figure 12: Average gross weekly income of pensioner units*, by age,
2006/07
- A greater need for self-sufficiency and thus life and pension advice
- More than 8 out of 10 people over 50 still saving for retirement
- Increased job mobility and lifestyle changes present opportunities
- An increasingly affluent population increased demand for advice
- Many consumers are likely to find saving difficult in the near term
- Poor stock market performance undermining confidence
- Uncertainty can increase demand for advice
- Regulatory Developments
- Key points
- The Retail Distribution Review
- Clarity of services -- Independent advice vs sales advice
- A move toward customer agreed remuneration (CAR)
- Raising professional standards
- New capital adequacy requirements...
- ...May be too much for small IFAs
- Treating Customers Fairly initiative
- Industry reaction to TCF
- Thoresen Review -- Money Guidance service
- Impact on market for financial advice
- Consumer Context
- Key points
- Savings and investment moving up the agenda
- Figure 13: Savings, investment, borrowing and debt repayment --
consumers' expected activity, September 2007-September 2008
- Affluent and wealthy to increase activity levels
- Figure 14: Expected financial activity, by socio-demographic and income
groups, September 2008 and average for the last 26 quarters
- Mixed bag for life and pension intermediaries
- Figure 15: Intended life and pensions* activity, Q3/Q4 2002-Q3/Q4 2008
- Investor sentiment remains weak
- Figure 16: Intended purchases of shares and equity-based unit trusts,
government and corporate bonds and bond-based unit trusts and sales of
equities and unit trusts, Q3/Q4 2002-Q3/Q4 2008
- Cash-based saving intentions rise but could fall along with inflation
- Figure 17: Intended cash-based activities, Q3/Q4 2002-Q3/Q4 2008
- Strengths and Weaknesses in the Market
- Figure 18: Market for pension related advice-- SWOT analysis, 2009
- Market Developments and Innovations
- Key points
- Advisers expect rise in web-based client servicing
- paaleads.com -- Online lead generation for IFAs
- Rubii.co.uk -- the financial adviser search engine
- Aviva launches controlyourpension.com
- FSA introduces pension switching advice plan
- Barclays introduces alternative investment friendly pension products
- The Intermediary Marketplace
- Key points
- Overview of the intermediary marketplace
- Figure 19: Number of FSA directly authorised retail intermediary firms,
by primary category, January 2006 to September 2008
- An increase in the number of firms undertaking financial advice activities
- Figure 20: Number of directly authorised financial advice firms, January
2006-September 2008
- But the next five years will be difficult
- Distribution Overview
- Key points
- IFAs drive new personal pension and annuity business
- EBC involvement in group pension sales
- 80% of new individual pension business sold via IFAs
- Figure 21: Proportional distribution of new APE* premiums into
individual pensions, by distribution channel, 2003-08
- Direct channels are growing their distribution share of annuities
- Figure 22: Proportional distribution of new pension annuity premiums, by
sales channel, 2003-08
- Income drawdown mainly sold through IFAs and tied-agents
- Figure 23: Proportional distribution of new income drawdown premiums, by
sales channel, 2003-08
- Individual pension distribution -- detailed breakdown
- Tied agents gaining a greater share of personal pensions business
- Figure 24: Proportional distribution of new APE* premiums into personal
pensions, by distribution channel, 2003-08
- IFAs generated 90% of new GPP business in 2008
- Figure 25: Proportional distribution of new APE* premiums into personal
pensions, by distribution channel, 2003-08
- Two in five individual stakeholder pensions sold via bancassurance
- Figure 26: Proportional distribution of new APE* premiums into
individual stakeholder pensions, by distribution channel, 2003-08
- Company-sponsored stakeholder pensions mainly sold through IFAs
- Figure 27: Proportional distribution of new APE* premiums into company
sponsored stakeholder pensions, by distribution channel, 2003-08
- Most new SIPP business generated through IFAs
- Figure 28: Proportional distribution of new APE* premiums into SIPPs, by
distribution channel, 2003-08
- Market Size -- Individual and Group Pensions
- Key points
- Individual vs. occupational pension schemes
- Figure 29: Total new premiums paid into insurance-administered
individual and occupational pensions, 2003-08
- New business down in 2008
- Figure 30: New individual pension premiums, by product type, 2003-08
- New SIPP and GPP business has boosted the overall market
- In force business growth has been unimpressive
- Figure 31: Total number of policies and regular premiums from individual
pensions business in force, by pension type, 2003-07
- Market Segmentation by Type of Intermediary -- Individual and Group
Pensions
- Key points
- 80% of new APE premiums sold through IFAs
- Figure 32: New APE* premiums into individual pensions, by type of
pension and distribution channel, 2008 (est)
- IFAs responsible for £14 billion in new single premiums in 2008
- Figure 33: Value of new premiums sold through independent
intermediaries, by type of premium and pension, 2003-08
- Single-tie new APE single premiums rise 15% over the past year
- Figure 34: Value of new premiums sold through single-tie agents, by type
of premium and pension, 2003-08
- Non-intermediated new premium business declines
- Figure 35: Value of non-intermediated new premiums, by type of premium
and pension, 2003-08
- Bancassurance worth close to £1 billion in new single premiums
- Figure 36: Value of new premiums sold through bancassurance, by type of
premium and pension, 2003-08
- Market Size -- Annuities and Income Drawdown
- Key points
- Annuity sales have been booming after A-Day
- Figure 37: New pension annuity business -- number of new contracts and
the value of new premiums, 2003-08
- In-force pension annuity business
- Figure 38: Pension annuity business in force -- payments per annum,
1997-2007
- Income drawdown the main alternative to an annuity
- Figure 39: Size of the pension annuities market versus the income drawdown
market -- new business, 2003-08
- Market Segmentation by Type of Intermediary -- Annuities and Income
Drawdown
- Key points
- £7.2 billion in new annuity business generated by IFAs in 2008
- Figure 40: Value of new pension annuity premiums, by sales channel,
2003-08
- IFAs generate £2 billion in new income drawdown business
- Figure 41: Value of new income drawdown premiums, by sales channel,
2003-08
- Market Overview and Key Players
- Market structure for financial advice
- Figure 42: Basic overview of market for financial advice
- Key players in IFA market
- The Tenet Group
- Sesame
- Bankhall
- Simply Biz
- Key players in retail banking advice market
- Barclays Financial Planning
- Lloyds Banking Group plc/Scottish Widows
- Brand Communication and Promotion
- Key points
- Advertising financial advice
- £21.6 million spent advertising financial advice in 2008
- Figure 43: Overview of total adspend on financial advice services, year
to December 2004-08
- Direct mail and press most popular forms of advertising
- Figure 44: Overview of media type used to advertise financial advice
services, Year to December 2008
- Providers advertising products to intermediaries
- Pension providers intermediary directed adspend totals £1.7 million
- Figure 45: Total intermediaries directed adspend, by product type, year
to December 2004-08
- Top ten spend £1.3 million advertising pension and annuity products in 2008
- Figure 46: Top ten advertisers of pension and annunity products to
intermedaires, year to December 2004-08
- All advertising to intermediaries goes through the press
- Figure 47: Top ten publications used by providers to advertise pension
and annuity products to intermediaries, Year to December 2008
- The IFA: Client Advice and Expectations
- Key points
- 31% expect clients to reduce pension contribution levels
- Figure 48: Expectations of how the economic slowdown will affect client
pension contributions, January 2009
- Two thirds of IFAs are advising clients to invest in collectives
- Figure 49: Where IFAs are recommending their clients invest their money,
January 2009
- Corporate bonds are also looking more attractive
- The IFA: Prospects and Future Business Intentions
- Key points
- 60% of IFAs feeling less confident about prospects
- Figure 50: Confidence in the financial services market compared to six
months ago, January 2009
- Economy is the biggest challenge facing pension business
- Figure 51: Biggest challenges facing pension intermediaries, January 2009
- IFAs looking to shift the balance of their business
- Figure 52: Key business intentions over the next 12 months, January 2009
- Appendix -- Broader Market Environment
- Figure 57: Projected socio-demographic composition of United Kingdom
population, 2003-13
- Figure 58: FTSE 100 and FTSE All Share -- daily index movements, January
2002-January 2009
- Figure 59: Monthly changes in annual inflation rates* for RPI and CPI --
UK, January 2002-January 2009
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