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Occupational and Group Pensions - UK - June 2013

“Pension reforms are going to encourage much-needed innovation in the occupational pension market. Pension providers will have to create more efficient business models if they want to engage with employees on low wages and SMEs and reap the rewards of auto-enrolment. Appealing to the mass market will have to involve stripping down internal systems and processes and re-engineering them from the consumer’s point of view.”

– Alexander Hiscox, Senior Financial Services Analyst

Some questions answered in this report include:

  • Where are the auto-enrolment opportunities for pension providers?
  • Will master trusts come to dominate the market?
  • How will simplicity be introduced to the workplace pensions market?
  • To what extent do consumers engage with occupational pensions?
  • Is there consumer demand for employer-led financial services?

Auto-enrolment will create substantial growth in the workplace pension markets over the next five years. Consumers who had previously never considered a pension will be automatically enrolled into a pension scheme. This will create new business for pension providers and help consumers to make better provision for their retirement.

However, the market place will become more competitive than ever before. Pension providers will have to work hard to differentiate themselves from the competition, and spend extra effort in guiding employers through the auto-enrolment process.

Providers have the opportunity to strengthen their reputations by offering great service to both employers and employees, but could undermine this by expanding their business too quickly and not communicating effectively with their new customers. This report provides insight into the occupational and group pension markets. It examines the impact of regulation, legislation, market trends, and product distribution. In addition to analysis of the major players in the occupational and group pension markets, Mintel’s exclusive consumer research explores attitudes towards employer provided financial planning and levels of consumer engagement with workplace pensions.


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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • The market
            • Insurer-administered business will continue to rise
              • Figure 1: New insurer-administered occupational pension premiums, 2007-17
              • Figure 2: Forecast of new GPP premiums, 2007-17
            • Market factors
              • Auto-enrolment will bring growth opportunities to the market
                • RDR will make adviser charges more transparent
                  • Recently introduced consultancy charges will be banned
                    • Companies, products and innovations
                      • Innovations
                        • Large pension providers restructure for auto-enrolment
                          • The consumer
                            • Consumers have low levels of savings
                              • Figure 3: Amount of savings and investments, April 2013
                            • DB schemes remain the most common form of occupational pension
                              • Figure 4: Ownership of financial products, April 2013
                            • A fifth of consumers work in small businesses
                              • Figure 5: Type of employer, April 2013
                            • Consumers are split as to whether they want employers to help with financial planning
                              • Figure 6: Attitudes towards employer’s role in financial planning, April 2013
                            • Consumers have low levels of engagement with their workplace pensions
                              • Figure 7: Attitudes towards managing employer pensions, April 2013
                            • A fifth of consumers don’t have a company pension because they can’t afford it
                              • Figure 8: Reasons for not owning an employer pension, April 2013
                            • What we think
                            • Issues in the Market

                                • Where are the auto-enrolment opportunities for pension providers?
                                  • Will master trusts come to dominate the market?
                                    • How will simplicity be introduced to the workplace pensions market?
                                      • To what extent do consumers engage with occupational pensions?
                                        • Is there consumer demand for employer-led financial services?
                                        • Trend Application

                                          • Increasing awareness to manage consumers retirement expectations
                                            • Bring in the experts
                                              • The next generation of savers
                                              • Regulation and Legislation

                                                • Key points
                                                  • The auto-enrolment rollout has begun
                                                      • Figure 9: Amount of auto-enrolment contributions, May 2013
                                                    • Impact of auto-enrolment
                                                      • Expected take-up and opt-out rates
                                                        • Figure 10: Likelihood of opting out of pension auto-enrolment, July 2012
                                                      • Kiwi Saver – a working example of auto-enrolment
                                                        • The OFT takes a closer look at the workplace pension market
                                                          • The RDR will help to make workplace pensions more transparent
                                                            • Ban on consultancy charging imminent
                                                              • Single tier pension introduced
                                                                • Contracting out
                                                                  • The Pension Protection Fund
                                                                  • Market Drivers

                                                                    • Key points
                                                                      • The UKs ageing population will put strain on retirement income
                                                                        • Figure 11: UK population, by age, 2010-35 (2010-based projections)
                                                                      • Longer life expectancy means people will have to save more
                                                                        • Figure 12: Cohort life expectancy at age 60, by gender, 1981-2059
                                                                      • Consumers will work for longer
                                                                        • Figure 13: Proportion of active members of private sector occupational pension schemes which allow members to work beyond normal pension age, by benefit structure and whether a pension can be drawn while continuing to work, 2011
                                                                      • Contribution rates remain higher to DB than DC schemes
                                                                        • Figure 14: Weighted average contribution rates to private sector occupational pensions schemes, by size and benefit structure and contributor (percentages), 2011
                                                                      • Pension liabilities set to increase
                                                                        • Figure 15: The number of occupational pensions in payment, by sector, 2012
                                                                      • Three quarters of companies offer some form of pension to their staff
                                                                        • Figure 16: Proportion of employers offering benefits to all employees, 2009-13
                                                                    • SWOT Analysis

                                                                        • Figure 17: SWOT analysis for occupational pensions market, June 2013
                                                                    • Who’s Innovating?

                                                                      • Key points
                                                                        • Lack of innovation in the marketplace
                                                                          • Master (or super) trusts could tackle issue of job mobility
                                                                            • Workplace ISAs give consumers more flexible savings options
                                                                              • Alternative assets to back up pension fund liabilities
                                                                                • Defined ambition and cash balance schemes
                                                                                • Occupational Scheme Membership

                                                                                  • Key points
                                                                                    • Fewer private companies offer pension benefits
                                                                                      • Figure 18: Number of active occupational pension scheme members, pensions in payment and preserved entitlements – UK, by sector, 2007-11
                                                                                    • Note on double counting
                                                                                      • Private sector contributions diminishing
                                                                                        • Figure 19: Number of active private sector occupational scheme members – UK, 1995-2011
                                                                                      • The private sector moves away from DB schemes in favour of DC
                                                                                        • Figure 20: Number of active members of occupational pension schemes – UK, by status, sector and benefit structure, 2011
                                                                                      • Large companies are the main source of occupational pensions
                                                                                        • Figure 21: Number of active members of private sector occupational schemes (open and closed) – UK, by size and benefit structure, 2011
                                                                                      • DB schemes look to minimise costs
                                                                                        • Figure 22: Proportion of active members of private sector DB occupational pension schemes, by changes made to the scheme since April of the previous year, 2009-11
                                                                                      • DC schemes become more accessible, ready for auto-enrolment
                                                                                        • Figure 23: Proportion of active members of private sector DC occupational pension schemes, by changes made to the scheme since 6 April of previous year, 2009-11
                                                                                    • Market Size and Forecast

                                                                                      • Key points
                                                                                        • Insurer-administered occupational pension market
                                                                                          • New regular-premium contracts declined by 12% in 2012
                                                                                            • Figure 24: New insurer-administered occupational pension business (volume and value), 2007-12
                                                                                          • Regular premiums fall in preparation for auto-enrolment
                                                                                            • Figure 25: New insurer-administered occupational pension premiums, by sub-sector, 2007-12
                                                                                          • TIP sales gather momentum
                                                                                            • Employers look to bulk buyouts to reduce their liabilities
                                                                                              • Occupational pension membership declines by 29% in the last five years
                                                                                                • Figure 26: Insurer-administered occupational pension business in force, 2007-11
                                                                                              • Insurer-administered schemes expected to grow
                                                                                                • Figure 27: Forecast for new insurer administered occupational pension premiums, 2007-17
                                                                                                • Figure 28: Value sales for new insurer-administered occupational pension premium value, 2007-17
                                                                                              • GPPs
                                                                                                • GPP have grown steadily in over the last five years
                                                                                                  • Figure 29: New GPP business, 2007-12
                                                                                                • New GPP business forecast
                                                                                                  • Figure 30: Forecast of new GPP premiums – Fan chart, 2007-17
                                                                                                  • Figure 31: Value of GPP premiums, 2007-17
                                                                                                • Forecast methodology
                                                                                                • Provider Ranking and Supply Structure

                                                                                                  • Key points
                                                                                                    • Large pension providers restructure in preparation for auto-enrolment
                                                                                                      • Figure 32: Ranking of top 20 providers of insurance-administered occupational pension schemes, by GWP, 2010-11
                                                                                                    • Other players in the supply structure of occupational pensions
                                                                                                      • Investment management companies
                                                                                                        • Pension IFAs
                                                                                                          • Benefit consultants
                                                                                                          • Companies and Products

                                                                                                            • AEGON UK
                                                                                                                • Figure 33: Key financial data for AEGON – UK operations, 2011-12
                                                                                                              • Legal & General
                                                                                                                  • Figure 34: Key financial data for Legal & General (savings business), 2011-12
                                                                                                                • Lloyds Banking Group
                                                                                                                    • Figure 35: Key financial data for Lloyds Banking Group (UK business), 2011-12
                                                                                                                  • Prudential
                                                                                                                      • Figure 36: Key financial data for Prudential plc, 2011-12
                                                                                                                    • Royal London Group/Scottish Life
                                                                                                                        • Figure 37: Key financial data for Royal London Group, 2011-12
                                                                                                                      • Standard Life
                                                                                                                          • Figure 38: Key financial data for Standard Life, 2011-12
                                                                                                                      • Brand Communication and Promotion

                                                                                                                        • Key points
                                                                                                                          • Adspend on pension products increases by 73% in 2013
                                                                                                                            • Figure 39: Total advertising expenditure on pension products and services, 2009-12
                                                                                                                          • Soaring adspend is mainly attributed to auto-enrolment
                                                                                                                            • Figure 40: Advertising expenditure on pension products and services, by product category, 2009-12
                                                                                                                          • DWP spends big on advertising
                                                                                                                            • Figure 41: Top six advertisers of pension products, 2012
                                                                                                                        • Channels to Market

                                                                                                                          • Key points
                                                                                                                            • Financial advisers increase their role in the regular-premium occupational pension market
                                                                                                                              • Figure 42: Distribution breakdown of new insurer-administered occupational pension business – regular premium, 2007-12
                                                                                                                            • RDR impacts distribution of single premium insurer administered pensions
                                                                                                                              • Figure 43: Distribution breakdown of new insurance-administered occupational pension business – single premium, 2007-12
                                                                                                                            • Financial advisers dominate the GPP market
                                                                                                                              • Figure 44: Distribution breakdown of new insurance-administered GPP business – regular premium, 2007-12
                                                                                                                              • Figure 45: Distribution breakdown of new insurance-administered GPP business – Single premium, 2007-12
                                                                                                                          • Level of Investible Assets

                                                                                                                            • Key points
                                                                                                                              • A quarter of consumers have no savings or investments
                                                                                                                                • Figure 46: Level of investible assets, April 2013
                                                                                                                              • Levels of savings and investments increase with age
                                                                                                                                • Figure 47: Amount of savings and investments, by demographics, April 2013
                                                                                                                            • Ownership of Pension Products

                                                                                                                              • Key points
                                                                                                                                • Current levels of occupational pension ownership are low
                                                                                                                                  • Figure 48: Ownership of saving and investment products, April 2013
                                                                                                                                • Widespread ownership of cash savings
                                                                                                                                  • DC schemes growing for younger consumers
                                                                                                                                    • Figure 49: Ownership of financial products, by demographics, April 2013
                                                                                                                                • Types of Employer and Occupational Pension Provision

                                                                                                                                  • Key points
                                                                                                                                    • Over half of adults employed in the private sector
                                                                                                                                      • Figure 50: Type of employer, April 2013
                                                                                                                                    • The largest hurdle for auto-enrolment will be small businesses.
                                                                                                                                      • Private sector businesses with fewer than 50 employees are least likely to offer pension benefits
                                                                                                                                        • Figure 51: Ownership of pension products, by type of employer, April 2013
                                                                                                                                    • The Role of Employers in Financial Planning

                                                                                                                                      • Key points
                                                                                                                                        • Almost half of consumers want more employer interaction with their finances
                                                                                                                                          • Figure 52: Attitudes towards employer’s role in financial planning, April 2013
                                                                                                                                        • Over a quarter of consumers want more flexible savings products
                                                                                                                                          • Small business employees want less employer interaction compared to the public sector
                                                                                                                                            • Figure 53: Type of employer, by attitudes towards employer’s role in financial planning, April 2013
                                                                                                                                          • Consumers with no savings or investments do not want help in managing their finances
                                                                                                                                            • Figure 54: Attitudes towards employer’s role in financial planning, by amount of savings and investments, April 2013
                                                                                                                                          • Consumers with savings up to £49,000 have been neglected and crave advice
                                                                                                                                            • Consumers who want financial involvement are more likely to own workplace pensions
                                                                                                                                              • Figure 55: Ownership of financial products, by attitudes towards employers role in financial planning, April 2013
                                                                                                                                          • Managing Occupational Pensions

                                                                                                                                            • Key points
                                                                                                                                              • Only a third of consumers know how much their pension is worth
                                                                                                                                                • Figure 56: Attitudes towards managing employer pensions, April 2013
                                                                                                                                              • Consumers say they don’t rely on their workplace pensions, but they will
                                                                                                                                                • Occupational pensions are underrated
                                                                                                                                                  • Consumers who don’t want employer involvement are the ones who need it
                                                                                                                                                    • Figure 57: Attitudes towards managing employer pensions, by attitudes towards employer’s role in financial planning, April 2013
                                                                                                                                                  • The move from DB to DC schemes will make for a more engaged workforce
                                                                                                                                                    • Figure 58: Attitudes towards managing employer pensions, by ownership of financial products, April 2013
                                                                                                                                                  • Owners of DB pensions value their employer contribution more
                                                                                                                                                    • Figure 59: Attitudes towards managing employer pensions, by ownership of financial products, April 2013
                                                                                                                                                • Barriers to Contributing to an Occupational Pension

                                                                                                                                                  • Key points
                                                                                                                                                    • Financial pressures restrain pension saving for a fifth of consumers
                                                                                                                                                      • Figure 60: Reasons for not owning an employer pension, April 2013
                                                                                                                                                    • Occupational pension ownership will be more universal
                                                                                                                                                      • A small proportion put off occupational pension savings due to procrastination
                                                                                                                                                        • Small businesses are less likely to offer pension schemes
                                                                                                                                                          • Figure 61: Reasons for not owning an employer pension, April 2013
                                                                                                                                                      • Appendix – Market Structure

                                                                                                                                                        • Options for workplace pensions
                                                                                                                                                          • Figure 62: Framework for workplace pensions, 2013
                                                                                                                                                        • Main parties in the occupational pensions market
                                                                                                                                                          • Figure 63: The main participants in the occupational pensions market, 2013
                                                                                                                                                      • Appendix – Insurer-administered

                                                                                                                                                        • Total value of regular and single premium insurer-administered policies
                                                                                                                                                          • Figure 64: New insurer administered occupational pension scheme regular premiums, 2007-17
                                                                                                                                                          • Figure 65: New insurer administered occupational pension scheme single premiums, 2007-17
                                                                                                                                                      • Appendix – GPP

                                                                                                                                                        • Total volume of regular and single premium GPP policies
                                                                                                                                                          • Figure 66: Group personal pension business in force, 2007-11
                                                                                                                                                        • Total GPP market volume
                                                                                                                                                          • Figure 67: Number of new GPP premiums, 2007-17
                                                                                                                                                          • Figure 68: New GPP premiums, 2007-17
                                                                                                                                                        • Regular premiums
                                                                                                                                                          • Figure 69: Regular premiums, 2007-17
                                                                                                                                                          • Figure 70: Regular premiums, 2007-17
                                                                                                                                                        • Single premiums
                                                                                                                                                          • Figure 71: Single premiums, 2007-17
                                                                                                                                                          • Figure 72: Single premiums, 2007-17
                                                                                                                                                        • Regular premium policies
                                                                                                                                                          • Figure 73: Regular premium policies, 2007-17
                                                                                                                                                          • Figure 74: Regular premium policies, 2007-17
                                                                                                                                                        • Single premium policies
                                                                                                                                                          • Figure 75: Single premium policies, 2007-17
                                                                                                                                                          • Figure 76: Single premium policies, 2007-17
                                                                                                                                                      • Appendix – Level of Investible Assets

                                                                                                                                                          • Figure 77: Most common amount of savings and investments, by demographics, April 2013
                                                                                                                                                          • Figure 78: Next most common amount of savings and investments, by demographics, April 2013
                                                                                                                                                      • Appendix – Ownership of Pension Products

                                                                                                                                                          • Figure 79: Ownership of saving, investment and pension products, by demographics, April 2013
                                                                                                                                                          • Figure 80: Ownership of saving, investment and pension products, by demographics, April 2013 (continued)
                                                                                                                                                          • Figure 81: Ownership of other saving, investment and pension products, by demographics, April 2013
                                                                                                                                                      • Appendix – Types of Employer and Occupational Pension Provision

                                                                                                                                                          • Figure 82: Most common type of employer, by demographics, April 2013
                                                                                                                                                          • Figure 83: Next most common type of employer, by demographics, April 2013
                                                                                                                                                      • Appendix – The Role of Employers in Financial Planning

                                                                                                                                                          • Figure 84: Most common attitudes towards employers role in financial planning, by demographics, April 2013
                                                                                                                                                          • Figure 85: Next most common attitudes towards employers role in financial planning, by demographics, April 2013
                                                                                                                                                      • Appendix – Managing Occupational Pensions

                                                                                                                                                          • Figure 86: Most common attitudes towards managing employer pensions, by demographics, April 2013
                                                                                                                                                          • Figure 87: Next most common attitudes towards managing employer pensions, by demographics, April 2013
                                                                                                                                                      • Appendix – Barriers to Contributing to an Occupational Pension

                                                                                                                                                          • Figure 88: Reasons for not owning an employer pension, by demographics, April 2013

                                                                                                                                                      Companies Covered

                                                                                                                                                      • Aegon UK
                                                                                                                                                      • BlackRock, Inc.
                                                                                                                                                      • Lawn Tennis Association (LTA)
                                                                                                                                                      • Legal & General Group PLC
                                                                                                                                                      • Lloyds Banking Group
                                                                                                                                                      • Prudential plc
                                                                                                                                                      • Royal London Group
                                                                                                                                                      • Scottish Life
                                                                                                                                                      • Scottish Widows Bank plc
                                                                                                                                                      • Standard Life Investments

                                                                                                                                                      Occupational and Group Pensions - UK - June 2013

                                                                                                                                                      £1,995.00 (Excl.Tax)