UK Life and Pensions Distribution Landscape Overview 2007

Table of Contents

• DATAMONITOR VIEW
• CATALYST
• SUMMARY
• ANALYSIS
• IFAs remain the dominant distributor in the retail market for life assurance, pensions and retail investment products in the UK
• Independent Financial Advisors dominate the provision of investment products and financial advice
• The IFA channel accounts for over 70% of total life and pensions sales in the UK
• The Financial Advisor channel is forecast to remain dominant going forward
• The most popular product areas among UK investors are SIPPs, REITs and Wraps according to IFAs
• IFAs are well-established in the market but many are shifting their focus upmarket
• The bancassurance channel is growing in market share, with about 15% of total life and pensions sales
• The current bancassurance market is dominated by unit-linked bonds and mortgage-related and savings-related term assurance
• Bancassurance going forward will continue to be dominated by unit-linked bonds and mortgage-related and savings-related term assurance
• Direct and worksite marketing are on the increase
• Direct marketing and sales of life and pensions products and retail investments in the UK
• Direct marketing is sent directly to the consumer and has traceable, measurable results
• Technology is affecting the way providers and advisors conduct their business
• Worksite marketing of life and pensions products and retail investments in the UK
• IFAs and providers both undertake worksite marketing
• Worksite marketing is likely to grow in prominence
• The FSA' s Retail Distribution Review aims to increase consumer access to financial products and services through offering a tiered system of financial advice
• The FSA' s Review of Retail Distribution takes place within a developing and changing legislative and technological market
• The FSA' s Retail Distribution Review has developed five key themes for reform
• There are five key themes to the FSA' s Retail Distribution Review
• Sustainability of the distribution sector
• Professionalism and reputation of the sector
• Impact of incentives
• Customer access to financial products and services
• Regulatory barriers and enablers
• The Review suggests two key industry features would improve the delivery of products and services appropriate to the needs of consumers
• Higher standards could increase costs for firms
• Wider access may require the development of other types of less comprehensive and less costly services
• The market for advice will be segmented in terms of the services provided to consumers
• The RDR is likely to impact on UK distribution channels by segmenting the IFA structure and, in the context of a changing legislative environment, increase direct and worksite marketing
• The dominance of IFAs will be challenged in the new regime
• The market for financial advice is adapting to allow more customers to benefit from advice
• Full and focused financial advice analyses financial needs in greater depth
• Primary Advice is a regulated service providing straightforward financial advice
• There exists a wide range of potential suppliers of primary advice
• There is the potential for banks to challenge the dominance of IFAs via the Primary Advice service
• Some financial advisory firms may find the provision of Primary Advice is compatible with their core business
• There is the potential for different financial services firms to offer Primary Advice by worksite marketing
• Pension market reforms will increase worksite marketing and change its nature
• Worksite marketing at large firms requires providers to have a specific infrastructure
• Enhanced technology and communications tools support worksite marketing
• IFAs are well-established in the market but many are shifting their focus upmarket

• Definitions
• Single premium policy
• Regular premium
• New business
• Wrap accounts
• Product definitions
• Life based savings products
• Life Assurance
• Single Premium Life
• With-profit bond
• Unit-linked bond
• Income and growth bonds
• Guaranteed Equity bonds
• Distribution bonds
• Purchased Life Annuities
• Other bonds
• Annual Premium Life
• Endowment Policy
• Whole of Life Insurance
• Term Assurance
• Income Protection
• Critical Illness
• Collective Life
• ISAs
• Personal Pensions
• Stakeholder Pensions
• Group personal pensions
• DSS Rebates
• Employer Sponsored Stakeholder pension (ESS)
• SIPPs (Self Invested Personal Pensions)
• FSAVC (Free-Standing Additional Voluntary Contributions)
• ABI definitions of distribution channels
• Independent Financial Advisors (IFAs)
• Direct sales forces
• Tied agents
• Multi-tied agents
• Bancassurance
• Direct marketing
• Telesales
• Other
• Matrix-Data definitions
• IFA firm types
• Grossed Annual Aggregate Turnover
• IFA sales people
• Methodology
• Further reading
• Relevant links
• Ask the analyst
• Datamonitor consulting
• Disclaimer

• Table 1: Historic single premium life sales through the FA channel, 2000-2006, £m APE
• Table 2: Historic regular premium life sales through the FA channel, 2000-2006, £m APE
• Table 3: Historic single premium pensions through the FA channel, 2001-2006, £m APE
• Table 4: Historic regular premium pensions through the FA channel, 2001-2006, £m APE
• Table 5: Forecast single premium life sales through the financial advisor channel, 2007-2011, £m APE
• Table 6: Forecast regular premium life sales through the financial advisor channel, 2007-2011, £m APE
• Table 7: Forecast single premium pensions through the financial advisor channel, 2007-2011, £m APE
• Table 8: Forecast regular premium pensions thorough the financial advisor channel, 2007-2011, £m APE
• Table 9: Forecast regular premium pensions through the financial advisor channel, 2007-2011, £m APE
• Table 10: Historic single premium life sales through the bancassurance channel, 2000-2006, £m APE
• Table 11: Historic regular premium life sales through the bancassurance channel, 2000-2006, £m APE
• Table 12: Historic single premium pensions sales through the bancassurance channel, 2001-2006, £m APE
• Table 13: Historic regular premium pensions sales through the bancassurance channel, 2001-2006, £m APE
• Table 14: Forecast single premium life sales through the bancassurance channel, 2007-2011, £m APE
• Table 15: Forecast regular premium life sales through the bancassurance channel, 2007-2011, £m APE
• Table 16: Forecast single premium pensions through the bancassurance channel, 2007-2011
• Table 17: Forecast regular premium pensions through the bancassurance channel, 2007-2011, £m APE
• Table 18: Pensions advertising expenditure, £ and by company (top 20 spenders) as a % of total2006
• Table 19: Life insurance advertising expenditure, £ and by company (top 20 spenders) as a % of total

• Figure 1: Financial Advisors dominate life and pensions new business 3
• Figure 2: Unit-linked bonds account for 83% of total single premium life sales through the FA channel
• Figure 3: Savings-related and mortgage-related term assurance dominate regular premium life sales through the FA channel
• Figure 4: Personal pensions currently dominate single premium pension sales through the FA channel
• Figure 5: Group personal pensions sales dominate the regular premium pensions market through the FA channel
• Figure 6: Unit-linked bonds are forecast to dominate single premium life sales through the financial advisor channel
• Figure 7: Savings-related and mortgage-related term assurance are forecast to dominate regular premium life sales through the financial advisor channel
• Figure 8: SIPPs are forecast to dominate single premium pensions sales through the financial advisor channel by 2011
• Figure 9: Personal pensions are forecast to decline in their dominance of the regular premium pensions market through the financial advisor channel as clients move into SIPPs and prepare for personal accounts
• Figure 10: Multi-tie FAs are increasing their share of total life and pensions new business
• Figure 11: Unit-linked bonds currently account for 65% of total single premium life sales through the bancassurance channel
• Figure 12: Mortgage-related & savings-related term assurance account for 85% of total regular premium life sales through the bancassurance channel
• Figure 13: Stakeholder and personal pensions currently dominate single premium pensions sales through the bancassurance channel, 2001-2006, £m APE
• Figure 14: Stakeholder pensions continue to dominate the regular premium pensions market through the bancassurance channel, 2001-2006, £m APE
• Figure 15: Unit-linked bonds are forecast to continue to dominate single premium life sales by bancassurance
• Figure 16: Mortgage-related and savings-related term assurance is forecast to continue to dominate regular premium life sales through the bancassurance channel
• Figure 17: Stakeholder pensions are forecast to continue to dominate the single premium pensions market through the bancassurance channel
• Figure 18: Forecast regular premium pensions through the bancassurance channel, 2007-2011
• Figure 19: Norwich Union dominates pensions advertising expenditure, 2006
• Figure 20: Axa Sun Life dominates life assurance advertising expenditure, 2006
• Figure 21: The future of retail distribution: proposed services