Occupational and Group Pensions - UK - June 2009

Table of Contents

• Issues in the Market
• Key issues in the market
• Abbreviations
• Market in Brief
• Scheme size and membership
• Pension contributions
• Healthy rise in new insurance-administered business in 2008
• IFAs boost their share of company pension distribution in 2008
• Job security and satisfaction top priorities for employees -- not pension
• Firms continue to cut back occupational pension provision
• Current economic difficulties could hinder short-term growth
  • Figure 1: Working age unemployment rate, 2004-09
• Standard Life tops insurance-administered pension market share table
• Brand communication and promotion
• Key consumer research findings
• Pension product ownership
• Length and value of contributions
• Attitudes and behaviour towards pensions in general
• Attitudes and behaviour towards workplace pensions
• Internal Market Environment
• Key points
• Job security and satisfaction top priorities for employees not pension
  • Figure 2: Factors considered important to employees, January 2009
• Firms continue to cut back occupational pension provision
• Trust-based schemes still have some advantages...
• ...but qualified trustees are becoming hard to find
• DC contribution levels are inadequate
• More employers are likely to adjust contribution levels
• Some individuals are not joining a company scheme
• Only a minority actively monitor their pension savings
• Active management might be better left to the experts
• Past mistakes have undermined faith in pensions
• The 2009 budget introduces a change in pension tax rules...
• ...but also raises major concerns about government meddling
• A more stable pensions legislative environment is needed
• The planned launch of Personal Accounts in 2012...
• ...and its possible impact on the pensions industry
• Auto-enrolment likely to create some issues
• The PPF provides protection but is expensive
• Current economic difficulties raise concerns over the PPF
• Pension buyout market activity likely to continue...
• ...but are insurers taking on too much risk?
• Smaller providers could benefit from the move to fee-based remuneration
• Broader Market Environment
• Key points
• Life expectancy on the rise
  • Figure 3: Cohort life expectancy at age 60, by gender, 1981-2056
• Average pensioner income drops significantly after 75
  • Figure 4: Average gross weekly income of pensioner units*, by age, 2007/08
• Old age dependency ratio rising
  • Figure 5: Projected size of the UK population, by age band, 2008-46
• Working beyond retirement age
  • Figure 6: UK economic activity, by gender and age, 2002-10
• Social trends and increased job mobility
• Economic conditions may hinder saving rates...
• ...but intentions to pay into a pension have been rising
  • Figure 7: Intended life and pensions activity, Q3/Q4 2002- Q1/Q2 2009
• Stock market' s poor performance can damage faith in pension saving
  • Figure 8: FTSE 100 and FTSE All-Share -- daily index movements, April 2002-April 2009
• Unemployment rate rises to 7.1%
  • Figure 9: Working age unemployment rate, 2004-09
• Competitive Context
• Key points
• Alternatives and supplements to workplace-based pensions
  • Figure 10: Summary of retirement funding strategies
• Pensions and pension alternatives
• Personal Accounts will compete at the lower end of the market
• Non-pension alternatives
• ISAs
• Buy-to-let property
• Strengths and Weaknesses in the Market
  • Figure 11: Occupational/group pensions -- SWOT analysis, 2009
• Scheme Size and Membership
• Key points
• Private sector occupational pension scheme membership on the decline
  • Figure 12: Number of private sector occupational pension schemes in the UK, by scheme size, 2003-07
• Status of private and public sector schemes
  • Figure 13: Status of private and public sector schemes, 2007
• DC schemes significantly outnumber DB schemes
  • Figure 14: Number of open and closed private sector single-section schemes, by benefit structure and size band, 2007
• Active occupational scheme membership
  • Figure 15: Number of active occupational scheme members, by sector, 1991-2007
• Over three quarters of active members were contracted out in 2007
  • Figure 16: Active members of private sector schemes, by route to being contracted out, 2007
• Value of Funded Pensions
• Key points
• 18% of pension funds held in the insurance administered sector in 2007
  • Figure 17: Value of assets in funded pensions, in real terms, 1997-2007
• Pension Contributions
• Key points
• Slowdown in overall contributions in 2007
  • Figure 18: Contributions to private pension schemes, by scheme type -- UK, 2002-07
• Market Size and Forecast - Insurance-Administered Sector
• Key points
• Rise in new business in 2008 as companies fund deficits
  • Figure 19: New insurance-administered occupational pension business, 2001-09(est)
• In-force business reflects a decline in membership
  • Figure 20: Insurance-administered occupational pension business in force, 2002-07
• Buyout market nearly doubles in 2008
  • Figure 21: New insurance-administered occupational pension business, by sub-sector, 2007 and 2008
• Forecast
  • Figure 22: Forecast of new insurance-administered occupational business, 2004-14
• GPP market size
• New single-premium GPP contracts rise significantly
  • Figure 23: New GPP business, 2002-09
• In-force GPP business
  • Figure 24: GPPs in force, 2002-07
• Forecast
  • Figure 25: Forecast of new GPP business, 2004-14
• Factors incorporated
• Market Share
• Key points
• A shuffle among the top five occupational pension providers in 2007
  • Figure 26: Top 20 insurance companies in the occupational pensions market, based on UK gross written premium, 2006 and 2007
• Lloyds top in the individual pension market
  • Figure 27: Top 20 insurance companies in the individual pensions market, based on UK gross written premium, 2006 and 2007
• Top occupational pension providers also active in group pensions
• Swiss Re and Deutsche Bank buy their way in
• Companies and Products
• Supply structure
  • Figure 28: The main participants in the occupational pensions market
• Employers
• Insurers
• Standard Life
• Prudential
• AEGON
• Legal & General
• Canada Life
• Investment management
• Pension IFAs
• Benefit consultants
• Other professional services
• Brand Communication and Promotion
• Key points
• Direct advertising of company pensions to consumers is rare
• Pensions adspend declines by nearly 50% in the year to April 2009
  • Figure 29: Pension-related advertising expenditure, by sub-category, year to April 2005-09
• Smaller provider adspend plummets
  • Figure 30: Pension-related advertising expenditure, by top ten advertisers, year to April 2005-09
• Press takes up 60% of total adspend on pensions
  • Figure 31: Overview of media type used to advertise pensions-related products, year to April 2008 and 2009
• Channels to Market
• Key points
• Most company pension business sold with advice
• EBCs are active in the sale of group pensions
• IFAs boost their share of new occupational pension regular premiums
  • Figure 32: Distribution breakdown of new insurance-administered occupational pension business -- regular premium, 2003-08
• Demand for independent advice even stronger for single premiums
  • Figure 33: Distribution breakdown of new insurance-administered occupational pension business -- single premium, 2003-08
• Over 90% of new regular- and single-premium GPP sales sold via IFAs
  • Figure 34: Distribution breakdown of new insurance-administered GPP business -- regular and single premium, 2003-08
• The Consumer -- Pension Product Ownership
• Key points
• Just over a third of non-retired adults are saving in a workplace pension
  • Figure 35: Ownership of pension products, by type, January 2009
• Cross-ownership of pensions
  • Figure 36: Ownership of pension products and retirement savings -- cross-analysis, January 2009
• Age and workplace pension membership
  • Figure 37: Pension ownership, by age, January 2009
• Wages and socio-economic status
  • Figure 38: Pension ownership, by socio-economic group and gross annual household income, January 2009
• Pension ownership by technology and media usage
  • Figure 39: Type of pension owned. by daily newspaper readership, technology usage, internet usage frequency and web usage, January 2009
• The Consumer -- Length and Value of Contributions
• Key points
• Length of contributions
• 51% of workplace pension holders contributing for over ten years
  • Figure 40: Number of years making pension contributions, by type of pension, January 2009
• The value of contributions rises over time
  • Figure 41: Number of years making pension contributions, by value of contributions, January 2009
• Some last-minute pension saving among the 45-64s
  • Figure 42: Number of years making pension contributions, by age, January 2009
• Income and length of contributions
  • Figure 43: Number of years making pension contributions, by gross annual household income, January 2009
• Value of contributions
• One in five workplace pension savers paying in £100-199 a month
  • Figure 44: Monthly pension contributions, by type of pension, January 2009
• Monthly contributions rise with age
  • Figure 45: Monthly pension contributions, by gender, age, lifestage and marital status, January 2009
• Unsurprisingly wealthy contributing the most to pension pots
  • Figure 46: Monthly pension contributions, by socio-economic group, working status, gross annual household income, TV region and household tenure, January 2009
• Media and technology usage and the value of contributions
  • Figure 47: Monthly pension contributions, by daily newspaper readership, technology usage, internet usage frequency and web usage, January 2009
• Appendix -- Definitions, Industry Structure and Legislation
• Market background and definitions
  • Figure 64: Types of private pension provision in the UK
• Definitions
• Occupational schemes
• Individual pensions
• Group pensions
• GPPs vs group stakeholder and group SIPPs
• GPPs provide significant benefits for employers
• Workplace pensions structure
  • Figure 65: Types of workplace pension, 2007
• Scheme administration
• Benefit structures
• The role of the Pensions Regulator
• The Pensions Regulator and trustees
• Types of occupational scheme closure
• Reforming the UK pension system
• A-day pensions simplification
• Other definitions
• Appendix -- The Consumer: Pension Ownership
  • Figure 66: Type of pension owned, by gender, age, lifestage and marital status, January 2009
  • Figure 67: Type of pension owned, by socio-economic group, working status, gross annual household income, TV region and household tenure, January 2009
  • Figure 68: Type of pension owned. by daily newspaper readership, technology usage, internet usage frequency and web usage, January 2009
• Appendix -- The Consumer: Length and Value of Contributions
  • Figure 69: Number of years making pension contributions, by gender, age, lifestage and marital status, January 2009
  • Figure 70: Number of years making pension contributions, by socio-economic group, working status, gross annual household income, TV region and household tenure, January 2009
  • Figure 71: Number of years making pension contributions, by daily newspaper readership, technology usage, internet usage frequency and web usage, January 2009