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Group Pensions - UK - June 2011

Mintel’s report examines these developments in detail and looks at how the occupational pensions sector is shaping up to face the many changes and opportunities that lie ahead. To help provide context, the report will additionally draw on a range of information and data sources, including Mintel’s own consumer survey finding.

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • The market
            • New insurer-administered occupational business
              • Figure 1: Forecast of trust-based insurer-administered occupational pension market – fan chart, 2006-16
            • Sub-sector performance
              • New GPP business
                • Figure 2: Forecast of the contract-based GPP market – fan chart, 2006-16
              • Active membership continues to recede
                • Scheme administration and funding
                  • Deficit reduction
                    • Market factors
                      • Economic backdrop
                        • Major pension reform
                          • Changing asset mix
                            • Other industry developments
                              • Companies, brands and innovation
                                • Product innovation
                                  • FTSE 100 firms run the largest private sector schemes
                                    • Top five players in the insurer-administered sector control three fifths of the market
                                      • IFAs generate the lion’s share of insurer-administered sales
                                        • Minimal above-the-line advertising
                                          • The consumer
                                            • An occupational DB scheme is the most common pension type
                                              • Figure 3: Ownership of pensions, savings and investments, by type, April 2011
                                            • Market barriers
                                              • Attitudes towards company pension schemes and awareness of NEST
                                                • What we think
                                                • Issues in the Market

                                                    • What are employers offering instead of final salary schemes?
                                                      • What is the potential size of the NEST market and who stands to benefit?
                                                        • What proportion of workers could opt out?
                                                          • What will be the impact on existing workplace arrangements?
                                                            • What impact will NEST have on the contract-based GPP sector?
                                                              • What are the prospects for the buyout market?
                                                              • Future Opportunities

                                                                • Creating a fair and trustworthy private pensions system
                                                                  • The need for ‘meaning’ applies especially to pensions
                                                                  • Internal Market Environment

                                                                    • Key points
                                                                      • A company pension forms an integral part of the benefits package…
                                                                        • Figure 4: Proportion of (large) employers offering pension and other related core benefits, 2011
                                                                      • …but over the past decade there’s been a major shift in the type of scheme offered
                                                                        • Routes to closure
                                                                          • PPF moves back into the black
                                                                            • PPF to adopt new levy framework in April 2012
                                                                              • Strategies to reduce pension liabilities: the buyout route
                                                                                • Figure 5: New insurer-administered occupational pension business, by sub-sector, 2009 and 2010
                                                                              • Move towards contract-based workplace schemes
                                                                                • Contribution rates are much lower for DC than DB schemes
                                                                                  • Figure 6: Weighted average contribution rates to private sector occupational pension schemes, by size and benefit structure, 2009
                                                                                • Workplace pensions to get a major boost from new reforms
                                                                                  • DC pool will be boosted by up to around 9 million members
                                                                                    • NEST will impose a 1.8% contribution charge on members
                                                                                      • Investment strategy will be determined by a pre-determined retirement date
                                                                                        • Impact on existing pension arrangements
                                                                                            • Figure 7: Likely strategies to be used by (large) employers to meet increased costs resulting from the new pension reforms, 2011
                                                                                          • General issues affecting the wider pension industry
                                                                                          • Broader Market Environment

                                                                                            • Key points
                                                                                              • Slow economic recovery impacts on group pensions market
                                                                                                • Household savings level falls due to slower earnings growth
                                                                                                  • Higher inflation requires pension savings to work harder
                                                                                                    • Figure 8: Average annual changes in the Bank of England base rate, CPI and RPI – UK, 2003-12
                                                                                                  • Stockmarket improvement helps reduce pension deficits
                                                                                                    • Figure 9: FTSE 100 and FTSE All-Share – daily index movements, April 2002-April 2011
                                                                                                  • UK pension funds decrease weighting in equities
                                                                                                    • Increasing longevity poses problems for the pensions industry
                                                                                                      • Figure 10: Cohort life expectancy at age 60, by gender, 1981-2058
                                                                                                    • Occupational pensions contribute 24% to average pensioner incomes
                                                                                                      • Figure 11: Average pensioner income, by source, at current prices, 2008/09
                                                                                                    • UK workforce comprises a rising number of over-65s
                                                                                                    • Competitive Context

                                                                                                      • Key points
                                                                                                        • Alternative retirement funding strategies
                                                                                                          • Figure 12: Summary of retirement funding strategies, 2011
                                                                                                        • Most common types of workplace pension
                                                                                                          • Figure 13: Framework for workplace pensions, 2011
                                                                                                        • Most occupational schemes are self-administered
                                                                                                          • Value of self-administered versus insurer-administered sector
                                                                                                            • Figure 14: Value of assets in funded pensions in real terms, 1999-2009
                                                                                                          • Increase in DC membership of insurer-administered schemes
                                                                                                            • Figure 15: Insurer-administered occupational pension business in force, 2005-09
                                                                                                          • GPPs have become more popular since April 2006
                                                                                                            • Figure 16: Group personal pension business in force, 2005-09
                                                                                                          • GPPs versus group stakeholder and group SIPPs
                                                                                                          • Market SWOT Analysis

                                                                                                              • Figure 17: Occupational/group pensions – SWOT analysis, 2011
                                                                                                          • Who’s Innovating?

                                                                                                            • Key points
                                                                                                              • Growing prominence of shared-risk solutions
                                                                                                                • More employers using salary sacrifice
                                                                                                                  • Pension providers target SMEs ahead of 2012 pension reforms
                                                                                                                    • Standard Life launches flexible benefits package
                                                                                                                      • New technology facilitates new distribution/administration developments
                                                                                                                        • Mercer simplifies investment options for DC scheme members
                                                                                                                        • Occupational Scheme Membership

                                                                                                                          • Key points
                                                                                                                            • Active membership in the public sector stabilises…
                                                                                                                              • Figure 18: Number of active occupational pension scheme members, pensions in payment and preserved entitlements – UK, by sector, 2006-09
                                                                                                                            • Note on double counting
                                                                                                                              • …but continues to fall in the private sector
                                                                                                                                • Figure 19: Number of active private sector occupational scheme members – UK, 1991-2009
                                                                                                                              • Number of schemes also in decline
                                                                                                                                • Nearly half of all members in ‘open’ private sector schemes are DC arrangements
                                                                                                                                  • Figure 20: Number of active members of occupational pension schemes – UK, by status, size, sector and benefit structure, 2009
                                                                                                                                  • Figure 21: Number of active members of private sector occupational schemes (open and closed) – UK, by size and benefit structure, 2009
                                                                                                                                • Over two thirds of active members were contracted out in 2009
                                                                                                                                  • Figure 22: Number of active members of private sector occupational schemes, by contracting out status, 2007-09
                                                                                                                                • Other key findings
                                                                                                                                  • Scheme changes are common
                                                                                                                                    • Figure 23: Proportion of active members of private sector DB occupational pension schemes, by changes made to the scheme since 6 April of previous year, 2007-09
                                                                                                                                    • Figure 24: Proportion of active members of private sector DC occupational pension schemes, by changes made to the scheme since 6 April of previous year, 2007-09
                                                                                                                                • Market Size and Forecast

                                                                                                                                  • Key points
                                                                                                                                    • Insurer-administered occupational pension market
                                                                                                                                      • Lump-sum investment drives new business growth
                                                                                                                                        • Figure 25: New insurer-administered occupational pension business (volume and value), 2005-10
                                                                                                                                      • TIPs and bulk buyouts represent the largest share of new business
                                                                                                                                        • Figure 26: New insurer-administered occupational pension premiums, by sub-sector, 2005-10
                                                                                                                                      • The growth of the risk-transfer market
                                                                                                                                        • Figure 27: In-force bulk buyout business, 2007-10
                                                                                                                                        • Figure 28: New pension bulk buyout sales (volume and value), 2007-10
                                                                                                                                      • Occupational pension sector set for further growth
                                                                                                                                        • Figure 29: Forecast of new insurer-administered occupational pension premiums – fan chart, 2006-16
                                                                                                                                        • Figure 30: Forecast of new insurer-administered occupational pension business, 2011-16
                                                                                                                                      • Group personal pension market
                                                                                                                                        • New GPP sales soar
                                                                                                                                          • Figure 31: New GPP business, 2005-10
                                                                                                                                        • New GPP business forecast…
                                                                                                                                          • Figure 32: Forecast of new GP premiums – fan chart, 2006-16
                                                                                                                                          • Figure 33: Forecast of new GPP business, 2011-16
                                                                                                                                        • Forecast methodology
                                                                                                                                          • Fan chart explanation
                                                                                                                                          • Supply Structure and Market Share

                                                                                                                                            • Key points
                                                                                                                                              • Supply structure of workplace pensions
                                                                                                                                                • Figure 34: The main participants in the occupational pensions market, 2011
                                                                                                                                              • Employers
                                                                                                                                                • The largest Plcs are among the largest employers in the UK
                                                                                                                                                  • Figure 35: The top 20 listed companies, by market capitalisation, May 2011
                                                                                                                                                • Private sector pension fund deficit falls
                                                                                                                                                  • Insurance companies
                                                                                                                                                    • Standard Life tops the rankings in the insurer-administered sector
                                                                                                                                                      • Figure 36: Top 20 providers of insurer-administered occupational pension schemes, by GWP, 2008 and 2009
                                                                                                                                                    • Individual pensions sector
                                                                                                                                                      • Pension rankings by value of funds held
                                                                                                                                                        • Figure 37: Top ten UK insurance companies, by funds held in insurer-administered pension schemes, 2009
                                                                                                                                                      • Investment management
                                                                                                                                                        • Pensions IFAs
                                                                                                                                                          • Benefit consultants
                                                                                                                                                            • Other professional services
                                                                                                                                                            • Companies and Products

                                                                                                                                                                • AEGON UK
                                                                                                                                                                  • Legal & General
                                                                                                                                                                      • Figure 38: Key financial data for Legal & General (Savings Business), 2009 and 2010
                                                                                                                                                                    • Lloyds Banking Group
                                                                                                                                                                      • Prudential
                                                                                                                                                                        • Standard Life
                                                                                                                                                                            • Figure 39: Key financial data for Standard Life UK (long-term savings and investment business), 2009 and 2010
                                                                                                                                                                        • Brand Communication and Promotion

                                                                                                                                                                          • Key points
                                                                                                                                                                            • Pension providers and advisers increase their adspend
                                                                                                                                                                              • Figure 40: Advertising expenditure on pension products, by product category, 2008-10
                                                                                                                                                                            • Aviva and Scottish Widows use TV advertising to enhance their brand presence
                                                                                                                                                                              • Figure 41: Top six advertisers of pension products, 2008-10
                                                                                                                                                                            • Press and TV account for the largest share of pensions adspend
                                                                                                                                                                              • Figure 42: Advertising expenditure on pension products, by media type, 2008-10
                                                                                                                                                                          • Channels to Market

                                                                                                                                                                            • Key points
                                                                                                                                                                              • Most group pension business is sold with advice
                                                                                                                                                                                • In 2010, tied advisers grew their share of new regular-premium trust-based pensions business…
                                                                                                                                                                                  • Figure 43: Distribution breakdown of new insurer-administered occupational pension business – regular premium, 2005-10
                                                                                                                                                                                • …while the non-intermediated channel picked up share in the single-premium sector
                                                                                                                                                                                  • Figure 44: Distribution breakdown of new insurer-administered occupational pension business – single premium, 2005-10
                                                                                                                                                                                • IFAs control a much larger share of the GPP market
                                                                                                                                                                                  • Figure 45: Distribution breakdown of new GPP business – regular and single premiums, 2005-10
                                                                                                                                                                                • RDR impact on pension intermediaries
                                                                                                                                                                                  • ‘Over-regulation’ is a major headache for pensions IFAs
                                                                                                                                                                                    • Figure 46: Biggest challenges facing pension intermediaries, 2009 and 2010
                                                                                                                                                                                • Ownership of Pensions, Savings and Investments

                                                                                                                                                                                  • Key points
                                                                                                                                                                                    • Survey background
                                                                                                                                                                                      • Merely a third of non-retired adults have a private pension
                                                                                                                                                                                          • Figure 47: Ownership of pensions, savings and investments, April 2011
                                                                                                                                                                                        • Roughly a quarter of occupational scheme members also have an individual pension or GPP
                                                                                                                                                                                          • Figure 48: Ownership of pensions, savings and investments, by next most popular ownership of pensions, savings and investments, April 2011
                                                                                                                                                                                        • Gender gap is marginally narrower in the occupational pension sector
                                                                                                                                                                                          • Figure 49: Ownership of pensions, savings and investments, by gender, April 2011
                                                                                                                                                                                        • Occupational pension ownership peaks around age 50
                                                                                                                                                                                          • Figure 50: Ownership of pensions, savings and investments, by age, April 2011
                                                                                                                                                                                        • Part-time workers are as likely to have an occupational scheme as full-time workers
                                                                                                                                                                                          • Figure 51: Ownership of pensions, savings and investments, by working status, April 2011
                                                                                                                                                                                        • Summary of the main demographic drivers and target groups
                                                                                                                                                                                          • Driver 1: employment
                                                                                                                                                                                            • Driver 2: income
                                                                                                                                                                                              • Driver 3: age
                                                                                                                                                                                                • Implication and opportunity
                                                                                                                                                                                                • Barriers to Pension Saving

                                                                                                                                                                                                  • Key points
                                                                                                                                                                                                    • Nearly a third of non-pension savers just want to ‘live for today’
                                                                                                                                                                                                        • Figure 52: Barriers to retirement saving – by pension savers versus non-pension savers, April 2011
                                                                                                                                                                                                      • Many under-35s are more concerned with ‘getting on the housing ladder’ than saving for their retirement
                                                                                                                                                                                                        • Figure 53: Barriers to retirement saving, by gender and age, April 2011
                                                                                                                                                                                                    • Workers’ Attitudes towards Company Schemes

                                                                                                                                                                                                      • Key points
                                                                                                                                                                                                        • Employers’ pension contributions are much valued by staff
                                                                                                                                                                                                            • Figure 54: Attitudes towards occupational and group company pensions, by working status and gender, April 2011
                                                                                                                                                                                                          • Nearly one in five workers under age 35 have chosen not to join their company pension scheme
                                                                                                                                                                                                            • Figure 55: Attitudes towards occupational and group company pensions, by age, April 2011
                                                                                                                                                                                                          • C2DEs are the least enthused about pensions
                                                                                                                                                                                                            • Figure 56: Attitudes towards occupational and group company pensions, by socio-economic group, April 2011
                                                                                                                                                                                                          • Over a quarter of occupational pension members would look for a ‘good pension’ scheme when job hunting
                                                                                                                                                                                                            • Figure 57: Attitudes towards occupational and group company pensions, by next most popular ownership of pensions, savings and investments, April 2011
                                                                                                                                                                                                        • Appendix: Report scope and market definitions

                                                                                                                                                                                                            • Figure 58: Types of private pension provision in the UK, 2011
                                                                                                                                                                                                          • Occupational schemes
                                                                                                                                                                                                            • Defined-benefit (salary-related) schemes
                                                                                                                                                                                                              • Defined-contribution (money-purchase) schemes
                                                                                                                                                                                                                • Other workplace pensions
                                                                                                                                                                                                                  • Other definitions
                                                                                                                                                                                                                    • Regulation of workplace pension schemes
                                                                                                                                                                                                                      • Recent milestones in pension reform
                                                                                                                                                                                                                      • Appendix: Pension Ownership by Demographics

                                                                                                                                                                                                                          • Figure 59: Pension ownership, by type of pension, by demographics, April 2011
                                                                                                                                                                                                                      • Appendix: Profile of Pension Savers

                                                                                                                                                                                                                          • Figure 60: Profile of pension holders versus total non-retired sample, by demographics, April 2011

                                                                                                                                                                                                                      Companies Covered

                                                                                                                                                                                                                      • Aegon UK
                                                                                                                                                                                                                      • Association of British Insurers
                                                                                                                                                                                                                      • Aviva Plc
                                                                                                                                                                                                                      • Financial Services Authority (The)
                                                                                                                                                                                                                      • Hargreaves Lansdown Plc
                                                                                                                                                                                                                      • JPMorgan Invest LLC (BrownCo)
                                                                                                                                                                                                                      • Legal & General Group PLC
                                                                                                                                                                                                                      • Lloyds Banking Group
                                                                                                                                                                                                                      • MetLife, Inc. (Metropolitan Life Insurance Company)
                                                                                                                                                                                                                      • National Savings & Investments
                                                                                                                                                                                                                      • Origen
                                                                                                                                                                                                                      • Prudential plc
                                                                                                                                                                                                                      • Scottish Widows Bank plc
                                                                                                                                                                                                                      • Standard Life Bank Limited
                                                                                                                                                                                                                      • Unilever Plc
                                                                                                                                                                                                                      • Zurich Financial Services

                                                                                                                                                                                                                      Group Pensions - UK - June 2011

                                                                                                                                                                                                                      £1,750.00 (Excl.Tax)