Personal and Stakeholder Pensions - UK - March 2008

Table of Contents

• Issues in the Market
• Key issues
• Abbreviations
• Market in Brief
• New premiums into personal pensions have increased
  • Figure 1: New individual pension APE* premiums, by product type, 2002-07
• Many factors have encouraged market growth...
• Concerns are mounting over an ageing population
• The decline of occupational schemes has boosted the market
  • Figure 2: Status of private sector occupational pension schemes, 2006
• AXA leads the market
• Advertising budgets for pensions are relatively small
  • Figure 3: Advertising expenditure, by financial services category, 2002/03-2006/07
• The majority of new business comes through an IFA
• Occupational pensions are more commonly held
• Many perceive pensions to be ' complicated'
• Internal Market and Regulatory Environment
• Key points
• The decline of occupational pension schemes
• Basic state pension = basic lifestyle in retirement
• S2P replaces SERPS
• The impact of A-day...
  • Figure 4: Pensions lifetime allowance and annual allowance, 2006/07-2010/11
• ...with more options after retirement
• Reform of the UK pensions system
  • Figure 5: Summary of reccomendations in the Pensions White Paper
• The impact of personal accounts on the pensions industry?
  • Figure 6: Department for Work and Pensions model of the pensionable population, 2004
• The Retail Distribution Review
• Increasing consumer understanding
• What' s all this ' fair treatment' business about?
• Broader Market Environment
• Key points
• The UK' s ticking pensioner time bomb
  • Figure 7: Population growth projections, by age, 2002-12
• Changing longevity assumptions
• Stockmarket volatility may discourage investment
  • Figure 8: FTSE 100 Share Index, Jan 2006-Dec 2007
• A tough year expected in 2008 will hit pension contributions
  • Figure 9: Financial priorities over the next 12 months, by order of significance, January 2008
• The growing number of ABs is a positive sign for providers...
  • Figure 10: Population, by socio-economic distribution, 2002-12
• ...as is the increasing amount of personal disposable income
  • Figure 11: PDI, consumer expenditure and savings, 2002-12
• Macro-economic situation could cloud the picture
• Competitive Context
• Key points
• Occupational pension schemes on the decline
  • Figure 12: Number of private sector occupational pension schemes in the UK, by scheme size, 2002-06
• Half of private sector schemes frozen, closed or winding up
  • Figure 13: Status of private sector occupational pension schemes, 2006
• The continued rise of equity release...
  • Figure 14: Lifetime mortgages newly advanced and balances outstanding, by volume and value, 2002-06
• ...and the buy-to-let market
  • Figure 15: Number and value of buy-to-let sales, 1999-2007
• ISAs as an alternative to a pension?
  • Figure 16: ISA deposits, by type of ISA, 2001/02-2006/07
• Strengths and Weaknesses in the Market
• Market strengths
• Longevity increases the need for (larger) pensions
• The appeal of tax-efficient contributions
• Increasing flexibility in the market
• Personal accounts may raise the profile of personal pensions
• Market weaknesses
• A tightly regulated market limits opportunity for product development
• Weakness in the economy forecast for 2008 may discourage investment
• Perception that pensions are complicated and reserved for the affluent
• Personal accounts are a potentially competing product
• Market Size and Forecast
• Key points
• Individual vs. occupational pension schemes
  • Figure 17: Total new premiums paid into individual and occupational pensions, 2002-07
• A permanent shift in the balance
• The gradual decline of individual personal pensions
  • Figure 18: Total number of policies and regular premiums from individual pensions business in force, by pension type, 2002-06
• Disappointing increase in policies in force
• There' s big ones (personal pensions) and small ones (SIPPs)
  • Figure 19: Total number of individual pensions in force, by pension type, 2006
• Doom and gloom for stakeholder pensions?
  • Figure 20: New individual pension premiums, by product type, 2002-07
• SIPPs lead the way
• Market forecast
  • Figure 21: New APE* premiums into individual pensions, by pension type, 2003-12
• SIPPs continue to grow, stakeholders to stagnate
• Factors used in the forecast
• Market Share
• Key points
• AXA has climbed to lead the pack in 2006
  • Figure 22: Ranking of individual pension providers, based on UK gross written premium, 2004-06
• Companies and Products
• Fund performance varies between providers
  • Figure 23: Best-performing unit-linked and with-profits pensions, decade to March 2008
• AXA (AXA Sun Life)
• Standard Life
• AVIVA plc (Norwich Union Life)
• Lloyds TSB Group (Scottish Widows)
• AEGON plc (Scottish Equitable)
• Brand Communication and Promotion
• Key points
• Pensions is a small proportion of total financial services adspend
  • Figure 24: Advertising expenditure, by financial services category, 2002/03-2006/07
• A large proportion of adspend is accounted for by intermediaries
  • Figure 25: Pensions advertising expenditure, by sub-category, 2003/04-2006/07
• The top ten providers account for over half of all pensions adspend
  • Figure 26: Pensions advertising expenditure, by provider, 2006/07
• Press is the medium of choice for advertising pensions
  • Figure 27: Pensions advertising expenditure, by media type, 2006/07
• Channels to Market
• Key points
• The majority of new business comes through an IFA
  • Figure 37: New APE* premiums into individual pensions, by distribution channel, 2002-07
• Individual stakeholder pensions are sold by more tied agents...
  • Figure 38: New regular premiums into individual pensions, by type of pension and distribution channel, Q1-Q3 2007
• ...since stakeholder pensions are more suited to bancassurance
  • Figure 39: New regular premiums into individual pensions, via bancassurance, and by type of pension, 2005-07
• The Consumer: Pension Ownership and Contribution Levels
• Key points
• A word on analysis methodology
• A quarter of us are making no provision for retirement
  • Figure 40: Pension ownership, December 2007
• SIPPs have become popular
• How does all this bode for the industry?
• Overview of consumer profiles by pension type held
  • Figure 41: Pension ownership, by gender, age, and socio-economic-group (excluding respondents that are already retired), December 2007
• Final-salary schemes are reserved for the upper classes
• Pension ownership increases with age and income
  • Figure 42: Pension ownership, by marital status, lifestage, working status, household income and ACORN category, December 2007
• Single people are less likely to have a pension
• Pension ownership increases with earnings
• Over two fifths pay less than £100 a month into a pension
  • Figure 43: Monthly pension contributions, December 2007
• Insufficient pension contribution levels?
• Men tend to contribute more than women
  • Figure 44: Monthly pension contributions, by gender, age, lifestage, household income and tenure, December 2007
• Higher earners contribute more
• Renters may be worth targeting
• Personal pension holders are likely to pay in less
  • Figure 45: Monthly pension contributions, by type of pension, December 2007
• The Consumer: Attitudes towards Pensions
• Key points
• Only two fifths of us trust IFAs to give good pensions advice
  • Figure 46: Attitudes towards different sources of pensions advice, December 2007
• Wealthy individuals are more likely to trust IFAs
  • Figure 47: Attitudes towards different sources of pensions advice, by gender, age, socio-economic group, marital status, tenure and ACORN category, December 2007
• Younger people turn to family, not the professionals...
• ...but responses raise issues over the NPSS
• Pensions associated with a comfortable retirement...
  • Figure 48: Consumer word associations with pensions, December 2007
• ...but there are still negatives
• Most feel duty-bound when it comes to owning a pension
  • Figure 49: Consumer attitudes towards pensions, by mindset groups, December 2007
• Positives outweigh the negatives
• Men are more likely to have reservations
  • Figure 50: Consumer attitudes towards pensions, by mindset groups, by gender, age, marital status, lifestage and household income, December 2007
• Apathy is a condition of the young mind
• The unmarried have fewer reservations
• Families hold stronger reservations about pensions
• High earners see pensions as a duty-bound obligation
• Appendix: Pension Ownership and Contribution Levels
  • Figure 56: Pension ownership, by gender, age, socio-economic-group, marital status, lifestage, presence of children, Mintel' s Special Groups, working status, household income, car ownership, detailed lifestage groups and age/socio-economic group (excluding respondents that are already retired), December 2007
  • Figure 57: Pension contributions, by gender, age, socio-economic-group, marital status, lifestage, presence of children, Mintel' s Special Groups, working status, household income, tenure, region, ACORN category, media usage, supermarket usage, household size, car ownership, detailed lifestage groups, age/socio-economic group and terminal education age (excluding respondents that are already retired), December 2007