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Occupational and Group Pensions - UK - June 2010

  • One of the traditional advantages of offering a company pension is that it's a useful recruitment tool. Mintel's research suggests that it's of limited use, though - just a fifth of non-retired adults say that a good pension would be a major issue if they were looking for a new job.
  • Pensions are still useful when it comes to staff retention, though - three quarters of those with a company pension really value their employer's contributions.
  • To get maximum value from their pension schemes, firms need to raise employee engagement. Pension firms are increasingly trying to help their clients do just this - Friends Provident, AXA and Aviva, among others, have launched online tools intended to demystify occupational pensions, and to make it easier for scheme members to check on how their pension is performing.
  • In the recession, people have been prioritising short-term factors such as job security over the quality of a company pension scheme.
  • The launch of NEST should reverse the declining level of company pension ownership, although the relatively low level of compulsory contributions has led some to question how valuable it will be for lower earners.
  • The public sector has overtaken private firms when it comes to final salary pension schemes, but government cutbacks will reduce both the number of public sector workers and the value of their pensions.

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Table of contents

  1. Issues in the Market

      • Key issues
        • Market background and definitions
          • Figure 1: 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 2: Types of workplace pension, 2010
                    • Scheme administration
                      • Benefit structures
                        • The role of the Pensions Regulator
                          • The Pensions Regulator and trustees
                            • Reforming the UK pension system
                              • Tax reform
                                • Other definitions
                                • Future Opportunities

                                  • Boom comes to an end
                                    • Generation Name Game
                                    • Market in Brief

                                      • Scheme size and membership
                                        • Pension fund values and contributions
                                          • Fall in new insurance-administered business volumes in 2009
                                            • Major changes taking place in employee benefits market
                                              • A new pensions landscape…
                                                • …and a new operating environment
                                                  • Pension fund deficits remain high
                                                    • IFAs losing market share
                                                      • Standard Life tops insurance-administered pension fund table
                                                        • Brand communication and promotion
                                                          • Key consumer research findings
                                                            • Pension product ownership
                                                              • Attitudes towards pensions in general
                                                                • Attitudes towards workplace pensions
                                                                  • Attitudes towards retirement age
                                                                  • Internal Market Environment

                                                                    • Key points
                                                                      • Security ranks above pension contributions
                                                                        • Figure 3: Factors considered important to employees, 2009 and 2010
                                                                        • Figure 4: Proportion of employers offering pension benefits as core benefits, March 2010
                                                                      • Big drop in occupational pension provision
                                                                        • Shift to DC pension scheme continues
                                                                          • Towards 2012 and beyond
                                                                            • What schemes will employers choose?
                                                                              • A change of direction in pension policy?
                                                                                • RDR edging towards implementation date
                                                                                  • Pension scheme deficits remain high
                                                                                    • Pension Protection Fund under pressure to reduce its deficit
                                                                                      • Longevity risk becoming a key part of pension risk transfer market
                                                                                        • Emergence of corporate/group SIPPs
                                                                                        • Broader Market Environment

                                                                                          • Key points
                                                                                            • Rise of four million over-65s in next 15 years
                                                                                              • Figure 5: Cohort life expectancy at age 60, by gender, 1981-2058
                                                                                            • Retirees may have to live on half or less of average wage
                                                                                              • Figure 6: Average gross weekly income of pensioner units*, by age, 2007/08
                                                                                            • Boost to the state pension
                                                                                              • Rising longevity poses big policy challenges
                                                                                                • Figure 7: Projected size of the UK population, by age band, 2010-58
                                                                                              • More people will work longer
                                                                                                • Figure 8: UK economic activity among people of pension age, by gender, 2002-08
                                                                                              • Unemployment hits pension contributions
                                                                                                • Figure 9: Working age unemployment rate, 2004-09
                                                                                              • Fewer people intending to make regular pension contributions in recent years
                                                                                                • Figure 10: Pension contribution intentions, 2002-10*
                                                                                                • Figure 11: Pension contribution intentions, by household income, socio-economic group and working status, 2006-10
                                                                                              • Stockmarket volatility hits pension plans
                                                                                                • Figure 12: FTSE 100 and FTSE All Share indices, quarterly March 2000-March 2010
                                                                                            • Competitive Context

                                                                                              • Key points
                                                                                                • Strong demand for ISAs
                                                                                                    • Figure 13: ISA sales, by type, 2003/04-2008/09
                                                                                                  • Buy-to-let market in state of flux
                                                                                                      • Figure 14: New buy-to-let mortgage business, 2003-09
                                                                                                    • Pensions failing to attract the wealthy
                                                                                                    • Strengths and Weaknesses in the Market

                                                                                                        • Figure 15: Occupational/group pensions, SWOT analysis, 2010
                                                                                                    • Who’s Innovating?

                                                                                                      • Key points
                                                                                                        • Regulatory constraints restrict innovation – but set to change
                                                                                                          • Innovation to generate greater retirement planning engagement
                                                                                                            • Pensions get their own TV channel
                                                                                                              • Supporting advisers
                                                                                                                • Group SIPP and GPP developments
                                                                                                                  • Charging model could be transformed
                                                                                                                  • Market Size

                                                                                                                    • Key point
                                                                                                                      • Number of occupational schemes down a fifth since 2004
                                                                                                                        • Figure 16: Number of private sector occupational pension schemes in the UK, by scheme size, 2004-08
                                                                                                                      • Status of occupational pension schemes
                                                                                                                        • Rise in pensions in payment and preserved pension entitlements
                                                                                                                          • Figure 17: Number of members of occupational pension schemes; by membership type and sector, 2006-08
                                                                                                                        • Long-term decline in active members of occupational pension schemes
                                                                                                                          • Figure 18: Number of active members of occupational pension schemes; by sector, 1991-2008
                                                                                                                        • Much higher contribution rates in private sector DB rather than DC schemes
                                                                                                                          • Fewer schemes contracting out
                                                                                                                            • Figure 19: Number of active members of private sector occupational schemes, by contracting out, 2007 and 2008
                                                                                                                          • Value of funded pensions down 13% in 2008
                                                                                                                            • Figure 20: Value of assets in funded pensions in real terms, 1998-2008
                                                                                                                          • Segment Performance
                                                                                                                            • Insurance-administered section
                                                                                                                              • Figure 21: New insurance-administered occupational pension business, 2003-10*
                                                                                                                            • In-force business increases despite falling membership
                                                                                                                              • Figure 22: Insurance-administered occupational pension business in force, 2003-08
                                                                                                                            • Big gain in Trustee Investment Plans
                                                                                                                              • Figure 23: New insurance-administered occupational pension business, by sub-sector, 2008 and 2009
                                                                                                                            • Insurance-administered pension sector should benefit from the recovery
                                                                                                                              • Figure 24: Forecast of new Insurance-administered occupational pension business, APE premiums*, 2005-15
                                                                                                                            • Factors used in the forecast
                                                                                                                              • Group personal pensions – Market size
                                                                                                                                • Figure 25: New group personal pension business, 2003-09
                                                                                                                              • Little change in GPPs in force
                                                                                                                                • Figure 26: Group personal pension business in force, 2003-08
                                                                                                                            • Market Share

                                                                                                                              • Key points
                                                                                                                                • Little change in leading providers
                                                                                                                                  • Figure 27: Top 20 insurance companies in the occupational pension market, based on gross written premiums, 2007 and 2008
                                                                                                                                • Legal & General dominates in amount of funds held in insurer-administered pensions
                                                                                                                                • Market Structure, Companies and Products

                                                                                                                                    • Figure 28: The main participants in the occupational pension market
                                                                                                                                  • Employers
                                                                                                                                    • Insurers
                                                                                                                                      • Major players
                                                                                                                                        • Standard Life Plc
                                                                                                                                          • Prudential plc
                                                                                                                                            • AEGON
                                                                                                                                              • Legal & General Group
                                                                                                                                                • Canada Life
                                                                                                                                                • Channels to Market

                                                                                                                                                  • Key points
                                                                                                                                                    • Most company pension businesses sold with advice
                                                                                                                                                      • Falling presence of IFAs in new occupational pensions regular premium
                                                                                                                                                        • Figure 29: Distribution breakdown of new insurance-administered occupational pension business – regular premium, 2004-09
                                                                                                                                                      • Slump in new business through IFA channel in single-premium occupational pensions
                                                                                                                                                        • Figure 30: Distribution breakdown of new insurance-administered occupational pension business – single premium, 2004-09
                                                                                                                                                      • IFAs dominate in GPP business
                                                                                                                                                        • Figure 31: Distribution breakdown of new insurance-administered GPP business – regular and single premium, 2004-09
                                                                                                                                                    • Brand Communication and Promotion

                                                                                                                                                      • Key points
                                                                                                                                                        • Direct advertising of company pensions to consumers is rare
                                                                                                                                                            • Figure 32: Pensions adspend, 2007/08-2009/10
                                                                                                                                                          • Big jump in spending by major providers
                                                                                                                                                            • Figure 33: Leading pension advertisers, 2007/08-2009/10
                                                                                                                                                          • Press dominates medium used for advertising
                                                                                                                                                            • Figure 34: Pension adspend, by media type, 2007/08-2009/10
                                                                                                                                                        • Ownership of Savings and Investment Products

                                                                                                                                                          • Key points
                                                                                                                                                            • Nearly a third of consumers have an occupational/employer-based pension scheme
                                                                                                                                                              • Figure 35: Ownership of saving and investment products, March 2010
                                                                                                                                                            • The legacy of final-salary schemes
                                                                                                                                                              • Figure 31: Pension scheme membership, by working status, March 2010*
                                                                                                                                                            • A generational and regional gap
                                                                                                                                                            • Attitudes towards Pensions and Retirement Savings

                                                                                                                                                              • Key points
                                                                                                                                                                • Big rise in non-retired who believe pensions are the best way to save for retirement
                                                                                                                                                                  • Figure 36: Statements on pensions and retirement savings, 2009 and 2010
                                                                                                                                                                  • Figure 37: Agreement with ‘Pensions are the best way to save for retirement’, by gender, age and household income, 2009 and 2010
                                                                                                                                                                • Middle classes most worried about pension scheme security
                                                                                                                                                                  • Property still viewed as an alternative long-term savings vehicle
                                                                                                                                                                    • Only a minority of the non-retired regularly attend to pension matters
                                                                                                                                                                      • Differences in attitude between final-salary and defined-contribution pension scheme members
                                                                                                                                                                        • Figure 38: Statements on pensions and retirement savings, by most popular ownership of saving and investment products, March 2010
                                                                                                                                                                        • Figure 39: Statements on pensions and retirement savings, by next most popular ownership of saving and investment products, March 2010
                                                                                                                                                                    • Attitudes towards Occupational or Company Pension Schemes

                                                                                                                                                                      • Key points
                                                                                                                                                                        • A good pension scheme not key for job seekers
                                                                                                                                                                          • Figure 40: Attitudes towards occupational or company pension schemes, March 2010
                                                                                                                                                                        • A minority aren’t interested even when a pension is on offer
                                                                                                                                                                          • More DB members value employer contributing to pension than DC members
                                                                                                                                                                            • Figure 41: Attitudes towards occupational or company pension schemes, by most popular ownership of saving and investment products, March 2010
                                                                                                                                                                            • Figure 42: Attitudes towards occupational or company pension schemes, by next most popular ownership of saving and investment products, March 2010
                                                                                                                                                                        • Retirement Planning and Expectations

                                                                                                                                                                          • Key points
                                                                                                                                                                            • Over half of the non-retired expect to retire at or before the current state pension age
                                                                                                                                                                              • Figure 43: Planned age of retirement, March 2010
                                                                                                                                                                            • People retiring gradually best placed financially
                                                                                                                                                                              • Figure 44: Ownership of saving and investment products, by most popular planned age of retirement, March 2010
                                                                                                                                                                              • Figure 45: Ownership of saving and investment products, by next most popular planned age of retirement, March 2010
                                                                                                                                                                            • Early-intending retirees found among younger high earners
                                                                                                                                                                              • Older, single, modest earners most likely to retire later than state pension age
                                                                                                                                                                                • More people expect to retire at state pension age
                                                                                                                                                                                  • Around a quarter of the non-retired are Pension-poor
                                                                                                                                                                                    • Pension security a big worry for early retirees and gradual retirees
                                                                                                                                                                                      • Figure 46: Statements on pensions and retirement savings, by most popular planned age of retirement, March 2010
                                                                                                                                                                                      • Figure 47: Attitudes towards occupational or company pension schemes, by planned age of retirement, March 2010
                                                                                                                                                                                  • Appendix – Ownership of Savings and Investment Products

                                                                                                                                                                                      • Figure 48: Most popular ownership of saving and investment products, by demographics, March 2010
                                                                                                                                                                                      • Figure 49: Next most popular ownership of saving and investment products, by demographics, March 2010
                                                                                                                                                                                      • Figure 50: Other ownership of saving and investment products, by demographics, March 2010
                                                                                                                                                                                      • Figure 51: Repertoire of ownership of saving and investment products, by demographics, March 2010
                                                                                                                                                                                  • Appendix – Attitudes towards Pensions and Retirement Savings

                                                                                                                                                                                      • Figure 52: Most popular statements on pensions and retirement savings, by demographics, March 2010
                                                                                                                                                                                      • Figure 53: Next most popular statements on pensions and retirement savings, by demographics, March 2010
                                                                                                                                                                                  • Appendix – Attitudes towards Occupational or Company Pension Schemes

                                                                                                                                                                                      • Figure 54: Attitude towards occupational or company pension schemes, by demographics, March 2010
                                                                                                                                                                                  • Appendix – Further Analysis

                                                                                                                                                                                      • Figure 55: Target groups, by demographics, March 2010

                                                                                                                                                                                  Companies Covered

                                                                                                                                                                                  • Aegon UK
                                                                                                                                                                                  • Asda Group Ltd
                                                                                                                                                                                  • Association of British Insurers
                                                                                                                                                                                  • Aviva Plc
                                                                                                                                                                                  • AXA UK plc
                                                                                                                                                                                  • Bank of England
                                                                                                                                                                                  • British Airways Plc
                                                                                                                                                                                  • Co-operative Group
                                                                                                                                                                                  • Council of Mortgage Lenders
                                                                                                                                                                                  • Diageo UK
                                                                                                                                                                                  • Fidelity Investment Services Limited
                                                                                                                                                                                  • Financial Services Authority (The)
                                                                                                                                                                                  • Friends Provident plc
                                                                                                                                                                                  • Government Actuary's Department (GAD)
                                                                                                                                                                                  • Great-West Lifeco Inc
                                                                                                                                                                                  • Hargreaves Lansdown Plc
                                                                                                                                                                                  • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                                                                  • HSBC Private Bank (UK) Limited
                                                                                                                                                                                  • J. Sainsbury
                                                                                                                                                                                  • JPMorgan Invest LLC (BrownCo)
                                                                                                                                                                                  • Kraft Foods Inc. (U.S.A.)
                                                                                                                                                                                  • Lloyds Banking Group
                                                                                                                                                                                  • Marks & Spencer
                                                                                                                                                                                  • National Association of Pension Funds
                                                                                                                                                                                  • National Audit Office
                                                                                                                                                                                  • Pensions Commission
                                                                                                                                                                                  • Scottish Widows Investment Partnership Ltd
                                                                                                                                                                                  • Somerfield
                                                                                                                                                                                  • Standard Life Assurance Company
                                                                                                                                                                                  • Tesco Plc
                                                                                                                                                                                  • Threadneedle Investment Services Ltd
                                                                                                                                                                                  • Trinity Mirror plc
                                                                                                                                                                                  • Vodafone Group Plc (UK)
                                                                                                                                                                                  • Wm Morrison Supermarkets
                                                                                                                                                                                  • Zurich Financial Services

                                                                                                                                                                                  Occupational and Group Pensions - UK - June 2010

                                                                                                                                                                                  £1,995.00 (Excl.Tax)