Consumers and Retirement Planning - UK - August 2007

Table of Contents

• Issues in the Market
• Key issues
• Abbreviations
• Insights and Opportunities
• Tap into the non-savers
• Comfort through knowledge
• The adviser interface
• Market in Brief
• The market itself is vast and varied
• Challenges for providers of retirement savings and investment vehicles
• Opportunities exist
• Fast Forward Trends
• The CornerShop Bank
• Definition
• Context
• What next?
• The Over-Optioned
• Definition
• Context
• What next?
• The Nomadic Explorer
• Definition
• Context
• What next?
• Broader Market Environment
• Key points
• Living longer and the retiring Baby Boomers
  • Figure 1: Life-expectancy at age 60, by gender, 1981-2051
  • Figure 2: Population growth projections, by age, 2004-29
• The change in asset holdings
  • Figure 3: Holdings, by asset class, 1996-2006
• Undersaving and Replacement Rate
  • Figure 4: Suggested retirement income as a percentage of working income, 2006
• Stock market continues to be healthy
  • Figure 5: FTSE 100 Index preformance, 1985-2005
• Personal disposable income trends upwards
  • Figure 6: Personal disposable income forecast, 1989-2011
• Lending rate leads decisions
  • Figure 7: Bank of England base rate, 1977-2006
• Investor illiteracy, apathy and mistrust
• Ignorance is bliss?
• Understanding savings, investment and retirement needs
  • Figure 8: The compounding effects of investment growth, 2007-36
• Scope for online learning
• The struggle to create a healthy retirement income
  • Figure 9: Pension savings converted to annuity income, 2007-36
• Signs of greater awareness
  • Figure 10: Awareness of the subject of personal finance, 2007
• Economic backdrop
• Internal Market Environment
• Key points
• Psychological barriers
• 2012 -- a pensions revolution
• Threats and opportunities for providers
• Over a third of those in work eligible for the NPSS
  • Figure 11: Breakdown of those eligible for enrolment in the NPSS, 2006
• Pensions options for consumers
• The state pension
• State second pension (S2P)
• Occupational or company pension
• Personal pension
• Stakeholder pension
• Group personal pension (GPP)
• Additional voluntary contributions (AVC)
• Freestanding additional voluntary contributions(FSAVCs)
• Self-Invested Personal Pension (SIPP)
• Tax benefits
• Contribution tax relief
• Returns relief
• Lump sum relief
• ISA tax relief
• Pension reform
• Defined benefits decline
• Competitive Context
• Key points
• Buy-to-let (BTL)
  • Figure 12: Growth in the number of outstanding buy-to-let mortgages, 1998-2006
  • Figure 13: Growth in the average price of a home in the UK, 1993-2006
• Equity release
  • Figure 14: Number of equity release plans in force at year end, 2003-06
• Individual Savings Accounts (ISAs)
  • Figure 15: Number and value of ISAs subscribed, 2001/02-2005/06
• Equity and bond investments
• Own business
• Inheritance
• Engaging the consumer
• Strengths and Weaknesses in the Market
• Strengths
• Weaknesses
• Who' s Innovating?
• Key points
• Depolarisation
• Fidelity, Standard Life, Cofunds and their investment supermarkets
• Standard Life looks to build share
• Personal planning tools
• Group SIPPs
• IFAs have new source for leads
• The SIPP fight
• 5 for life
• Trade Perspective
• Technology and intermediaries
• Product opportunities
• Regulation
• Challenges and the future
• Market Size and Forecast
• Key points
• Context
• Collective investments and pensions
  • Figure 16: Summary of new business premiums, 2002-07
• Buy-to-let mortgages
  • Figure 17: Number and value of buy-to-let mortgages outstanding, 1999-2006
  • Figure 18: Number and value of buy-to-let sales, 1999-2006
  • Figure 19: Forecast of new buy-to-let mortgages, 2006-11
• Market Share
• Key points
• Pensions
  • Figure 20: Top ten pension providers in the UK, 2005
  • Figure 21: Top individual pension providers, 2005
  • Figure 22: Top other pension providers, 2005
• Halifax leads the way in the ISA market
  • Figure 23: Top cash ISA providers, 2007
• Buy-to-let
  • Figure 24: Top buy-to-let mortgage providers, 2005 and 2006
• Market make-up
• Companies and Products
• Scottish Widows
• Standard Life
• Aviva
• AXA
• AEGON Scottish Equitable
• Norwich Union
• Legal & General
• Brand Communication and Promotion
• Key points
• Public is wary of financial services advertising
  • Figure 25: Interest in financial services advertising, March 2007
  • Figure 26: Adspend on pensions, by type and related products, 2002/03-2006/07
• Print remains the preferred media channel for pension promotions
  • Figure 27: Pension adspend, by channel, 2006/07
  • Figure 28: Annual and cumulative adspend, by pension providers, 2002/03-2006/07
• Re-emphasising ISAs?
  • Figure 29: Annual and cumulative adspend, by ISA type, 2002/03-2006/07
• Rebound in BTL adspend
  • Figure 30: Adspend on buy-to-let mortgages, 2002/03-2006/07
• Channels to Market
• Key points
• The Independent Financial Adviser (IFA)
• Consolidation in the market
• Three key channels
  • Figure 31: Regular-premium individual pension business, 2002-06
  • Figure 32: Regular-premium group pension business, 2002-06
• Equity release and buy-to-let
  • Figure 33: Distribution channels used by the top ten buy-to-let lenders, 2006
• Consumer Financial Activity
• About the Financial Activity Bulletin
• Expected activity picks up
  • Figure 34: Expected financial activity -- savings, investment, borrowing and debt repayment, December 2005-March 2007
• Much greater emphasis on saving than spending
  • Figure 35: UK savings and spending indices, January 2001-March 2007
• Activity remains subdued across most demographic segments
  • Figure 36: Expected financial activity over the next six months, by gender, age, socio-economic group, household income and working status, March 2007
• Placing a cash deposit and saving in an ISA are the top activities
  • Figure 37: Top five financial activities planned in the next six months, March 2006-March 2007
• Identifying the main financial services providers
  • Figure 38: Saving, investment and lending: market sizes, by expected customer demand and brand leaders, March 2007
• Nationwide tops the activity chart
  • Figure 39: Activity levels of main financial services providers' customer bases, March 2007
• The Consumer -- Retirement Saving
• Key points
• Huge gaps in pension ownership still evident
  • Figure 40: Pension ownership, March 2007
• Half of population are not contributing to a pension
• Scope for female-friendly options
  • Figure 41: Pension ownership, by gender and socio-economic group, March 2007
• Implications and opportunities
• Low ownership among the young...
  • Figure 42: Pension ownership, by age, March 2007
• ...but the NPSS should change that
• Implications and opportunities
  • Figure 43: Pension ownership, by marital status and lifestage, March 2007
• Implications and opportunities
• Cash the key limiting factor
  • Figure 44: Main reasons for not contributing to a pension, March 2007
• Affordability and Apathy
• Implications and opportunities
• Affordability still an issue for the better off
  • Figure 45: Main reason for not contributing to a pension, by gender and socio-economic group, March 2007
• Implications and opportunities
• The gender divide
• Implications and opportunities
• Apathy and property -- the key trends among younger non-savers
  • Figure 46: Main reason for not contributing to a pension, by age, March 2007
• Implications and opportunities
• Cohabiting, but without the savings habit
  • Figure 47: Main reason for not contributing to a pension, by marital status and lifestage, March 2007
• Implications and opportunities
• Cash-strapped families can' t afford to worry about the future
• Implications and opportunities
• The Consumer -- Increasing Savings Activity
• Key points
• Plenty of reasons for saving -- so why aren' t they?
  • Figure 48: Factors that would encourage consumers to save more for retirement, March 2007
• Security is the primary motivator towards greater saving
• Necessity, not luxury
• Implications and opportunities
• ABs look to an early end to the working life
  • Figure 49: Which of these factors would encourage you to save more for retirement, by gender and socio-economic group, March 2007
• Implications and opportunities
  • Figure 50: Which of these factors would encourage you to save more for retirement, by age, March 2007
• Promoting the family angle
  • Figure 51: Which of these factors would encourage you to save more for retirement, by marital status and lifestage, March 2007
• Implications and opportunities
• Is targeting the non-savers a non-starter?
  • Figure 52: Factors that would encourage consumers to save more for retirement, by pension provision, March 2007
• Implications and opportunities
• Taking the easy option
• The case for tax reform
  • Figure 53: Attitudes towards pensions and retirement, March 2007
• Negative attitudes towards the industry continue
• Implications and opportunities
• ABs don' t believe the hype
  • Figure 54: Attitudes towards pensions and retirement, by gender and socio-economic group, March 2007
• Implications and opportunities
• How to engage younger consumers?
  • Figure 55: Attitudes towards pensions and retirement, by age, March 2007
• Implications and opportunities
• Time for a period of consolidation?
• Implications and opportunities
• Contrasting attitudes among the lifestages
  • Figure 56: Attitudes towards pensions and retirement, by marital status and lifestage, March 2007
  • Figure 57: Attitudes towards pensions, by pension ownership, March 2007
• Implications and opportunities
• The Consumer -- Targeting and Marketing Opportunities
• Key points:
• Target Groups
• 1 Uninvolved
• 2 Seeking Alternatives
• 3 Pension Faithful
• 4 Wary and Worried
  • Figure 58: Cluster group typologies, by statements on pension provision, March 2007
• Early retirement a key motivation for involved investors
  • Figure 59: Target group typologies, by statements on factors that would encourage people to save or invest more money into a pension, March 2007
• Demographic breakdown of the target groups
  • Figure 60: Target group typologies, by gender, age, socio-economic group, lifestage, household income, tenure, working status, ACORN categories and commercial TV viewing, March 2007
• Barriers to contributing to a pension
  • Figure 61: Main reasons for not currently contributing to a pension, March 2007
• Early retirement a key ambition
  • Figure 62: Factors that would encourage people to save or invest more money into a pension, March 2007