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Pensions Intermediary Focus - UK - January 2012

“The landscape is set to change quite dramatically for pension intermediaries in 2012. The arrival of NEST and continued preparations for the RDR will see the marketplace undergo something of a facelift. Other developments such as technological advancements and a more demanding customer are also key issues that pension intermediaries face.”

– Stephanie Seenan – Financial Services Analyst

Some questions answered in the report include:

  • How will auto-enrolment impact intermediaries?
  • What effect are technological advances having on platforms?
  • How is the change to the retirement age impacting the pensions industry?
  • Will the RDR see IFAs stop working with low to mid earners?
  • What can be done to boost the annuity market?

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • The market
            • Total pension premiums up in 2010-11
              • Figure 1: New individual pension regular premiums, by product type, 2011
              • Figure 2: New individual pension single premiums, by product type, 2011
            • Drawdown sales falter
              • Figure 3: Size of the pension annuities market versus the income drawdown market – new business, 2011
            • Market segmentation
                • Figure 4: Value of new regular premiums sold through independent intermediaries, 2011
              • The intermediary marketplace
                • Figure 5: Number of directly authorised retail intermediary firms, by sector (primary category), 2006-11
              • The view from IFAs
                • Figure 6: Biggest challenges facing IFAs, November 2011
                • Figure 7: IFA expectations, November 2011
                • Figure 8: Where IFAs are recommending their clients invest their money, November 2011
              • What we think
              • Issues in the Market

                  • How will auto-enrolment impact intermediaries?
                    • What effect are technological advances having on platforms?
                      • How is the change to the retirement age impacting the pensions industry?
                        • Will the RDR see IFAs stop working with low to mid earners?
                          • What can be done to boost the annuity market?
                          • Future Opportunities

                            • Becoming savvy about pensions removes the dependency on IFAs
                              • NEST is for the masses but people may want some individualism
                              • Internal Market Environment

                                • Key points
                                  • Pensions landscape is rapidly changing
                                    • Intermediaries must be RDR ready … or else change their specialism
                                      • FSA fines keeping the industry honest…
                                        • … but pension advisers still face criticism for overcharging
                                          • NEST will force many changes across the industry
                                            • SIPP popularity will drive the advice business
                                              • External volume of sales of new pension annuities reducing
                                                • Figure 9: External versus internal volume sales of new pension annuities – proportional distribution, 2000-10
                                              • How does the OMO impact advisers?
                                              • Regulatory Environment

                                                • Key points
                                                  • Changes to annuity purchasing
                                                    • OMO changes
                                                      • Capital adequacy requirement changes
                                                        • Complaints to FOS about FSAs continue to decrease
                                                          • Figure 10: Financial services firms complained about, by sector, 2006/07-2010/11
                                                        • The government and regulation are the biggest threats to the pension industry
                                                          • Changes to lifetime allowance
                                                            • Changes to the default retirement age
                                                              • End to compulsory retirement
                                                                • RDR remains a key regulatory influence
                                                                  • Auto-enrolment set to commence in 2012
                                                                  • Broader Market Environment

                                                                    • Key points
                                                                      • Economic recovery slow but steady… for now
                                                                        • As the cost of living increases the ability to save is being eroded
                                                                          • Living for longer means alternative retirement strategies are required
                                                                            • Figure 11: Cohort life expectancy at age 60, by gender, 1981-2060
                                                                          • Increasing trend for people to work beyond retirement age
                                                                            • Figure 12: Breakdown in gross pensioner income (weekly average at 2009/10 prices), 1996/97-2009/10
                                                                          • Volatility in the stockmarket is the only certainty for investors
                                                                            • Figure 13: FTSE 100 and FTSE All Share – daily index movements, November 2004-November 2011
                                                                          • Uninspiring financial situation puts a strain on pension saving
                                                                            • Figure 14: Monthly changes in the rate of annual inflation* and Bank of England base rate – UK, October 2007-October 2011
                                                                        • SWOT Analysis

                                                                            • Figure 15: SWOT Analysis
                                                                        • Who’s Innovating?

                                                                          • Key points
                                                                            • New valuation tool for advisers launched by Nucleus
                                                                              • Client feedback service from Sesame and Bankhall
                                                                                • Openwork introduces segmentation tool to prepare for RDR
                                                                                  • Tenet also launches ‘Tenet Advantage’ platform for RDR readiness
                                                                                  • The Intermediary Marketplace

                                                                                    • Key points
                                                                                      • Number of directly authorised intermediaries steadily falling
                                                                                        • Figure 16: Number of directly authorised retail intermediary firms, by sector (primary category), 2006-11
                                                                                      • Number of financial advice ARs and DA intermediary firms
                                                                                        • Figure 17: Number of financial advice ARs and DA intermediary firms, by type, 2007-11
                                                                                    • Distribution Overview

                                                                                      • Key points
                                                                                        • IFAs rule the world of pension distribution
                                                                                          • IFAs are the primary distributors of new individual pension premiums
                                                                                            • Figure 18: Proportional distribution of new individual pension APE* premiums, by distribution channel, 2006-11
                                                                                          • Pension annuity market slightly more diversified in terms of distribution
                                                                                            • Figure 19: Proportional distribution of new pension annuity APE* premiums, by sales channel, 2006-11
                                                                                          • IFAs service the more wealthy client in the income drawdown market
                                                                                            • Figure 20: Proportional distribution of new income drawdown APE* premiums, by sales channel, 2006-11
                                                                                          • 2011 sees IFAs take over 90% of the personal pension market
                                                                                            • Figure 21: Proportional distribution of new personal pension APE* premiums, by distribution channel, 200611
                                                                                          • Similarly, IFAs also dominate the group pension market
                                                                                            • Figure 22: Proportional distribution of new group personal pension APE* premiums, by distribution channel, 2006-11
                                                                                          • Single-tie and bancassurance play larger role in new individual stakeholder premium market
                                                                                            • Figure 23: Proportional distribution of new individual stakeholder pension APE* premiums, by distribution channel, 2006-11
                                                                                          • IFAs are the main distributors of company sponsored stakeholder pensions
                                                                                            • Figure 24: Proportional distribution of new company-sponsored stakeholder pension APE* premiums, by distribution channel, 2006-11
                                                                                          • SIPP distribution reliant on IFAs
                                                                                            • Figure 25: Proportional distribution of new SIPP APE* premiums, by distribution channel, 2006-11
                                                                                        • Market Size – Individual and Group Pensions

                                                                                          • Key points
                                                                                            • GPP and company-sponsored stakeholder pension levels rise in 2011
                                                                                              • Figure 26: New individual pension premiums, by product type, 2006-11
                                                                                            • SIPPs single premium transfer levels see significant growth in 2011
                                                                                              • Figure 27: Single-premium transfer business, 2006-11
                                                                                            • Some increases in policy numbers and contributions for 2010
                                                                                              • Figure 28: Total number of policies and regular premiums from individual pensions business in force, by pension type, 2004-10
                                                                                          • Market Segmentation – by Type of Intermediary – Individual and Group Pensions

                                                                                            • Key points
                                                                                              • Substantial increases in the total value of IFA sold premiums
                                                                                                • Figure 29: Value of new premiums sold through independent intermediaries, by type of premium and pension, 2005-11
                                                                                              • Tied agents’ share of personal pension premiums sees large decline
                                                                                                • Figure 30: Value of new premiums sold through single-tie agents, by type of premium and pension, 2005-11
                                                                                              • Value of GPP premiums sold through bancassurance sees marked increase
                                                                                                • Figure 31: Value of new premiums sold through bancassurance, by type of premium and pension, 2005-11
                                                                                              • Non-intermediated share of company stakeholder pensions and SIPPs grows significantly in 2011
                                                                                                • Figure 32: Value of non-intermediated new premiums, by type of premium and pension, 2005-11
                                                                                            • Market Size – Annuities and Income Drawdown

                                                                                              • Key points
                                                                                                • Annuity new business value increased slightly in 2011
                                                                                                  • Figure 33: Size of the pension annuities market versus the income drawdown market – new business, 2005-11
                                                                                              • Market Segmentation – by Type of Intermediary – Annuities and Income Drawdown

                                                                                                • Key points
                                                                                                  • Value of new pension annuity premiums rises across most channels
                                                                                                    • Figure 34: Value of new pension annuity premiums, by sales channel, 2005-11
                                                                                                  • Value of income drawdown business falls across all distribution channels in 2011
                                                                                                    • Figure 35: Value of new income drawdown premiums, by sales channel, 2005-11
                                                                                                • Companies and Products

                                                                                                  • The Tenet Group
                                                                                                      • Figure 36: Key financial data for Tenet Group Ltd, 2009-10
                                                                                                    • Honister Capital
                                                                                                      • Sesame Bankhall Group
                                                                                                          • Figure 37: Key financial data for Sesame Bankhall Group Limited, 2009-10
                                                                                                        • Positive Solutions (Financial Services)
                                                                                                            • Figure 38: Key financial data for Positive Solutions (Financial Services) Limited, 2009-10
                                                                                                          • Alexander Forbes Financial Services
                                                                                                              • Figure 39: Key financial data for Alexander Forbes Services Limited, 2010-11
                                                                                                            • Openwork
                                                                                                                • Figure 40: Key financial data for Openwork Limited, 2009-10
                                                                                                              • The Oval Group
                                                                                                                  • Figure 41: Key financial data for The Oval Group, 2009-10
                                                                                                              • Brand Communication and Promotion

                                                                                                                • Key points
                                                                                                                  • Independent financial advice adspend nearly doubles
                                                                                                                    • Figure 42: Overview of total adspend on financial advice services, 2009-11*
                                                                                                                  • Totally Money has 32% of financial advice services advertising
                                                                                                                    • Figure 43: Top ten advertisers of financial advice services, 2009-11
                                                                                                                  • Internet is the most popular medium for independent financial advice advertising
                                                                                                                    • Figure 44: Overview of media type used to advertise financial advice services, 2011*
                                                                                                                  • Total intermediary directed adspend for pensions falls in 2011
                                                                                                                    • Figure 45: Total intermediary-directed adspend, by product type, 2009-11
                                                                                                                  • Fidelity Investment Services is the biggest advertiser to the pension intermediary sector
                                                                                                                    • Figure 46: Top ten advertisers to the pension intermediary sector, 2009-11
                                                                                                                  • Just Retirement and LV Group head up annuity intermediary advertising
                                                                                                                    • Figure 47: Advertisers to the annuity intermediary sector, 2009-11
                                                                                                                • The IFA: Biggest Challenges Facing Pension Intermediaries

                                                                                                                  • Key points
                                                                                                                    • The uncertainty in the economy is the biggest challenge for IFAs
                                                                                                                      • Figure 48: Biggest challenges facing pension intermediaries, 2009-11
                                                                                                                  • The IFA: Client Advice and Expectations

                                                                                                                    • Key points
                                                                                                                      • Just under 50% of IFAs expect contribution levels to remain steady in 2012
                                                                                                                        • Figure 49: IFA expectations of how current economic climate will impact new pension business, 2009-11
                                                                                                                      • Collective investments are the most recommended product
                                                                                                                        • Figure 50: Where IFAs are recommending their clients invest their money, 2009-11
                                                                                                                    • The IFA: Prospects and Future Business Intentions

                                                                                                                      • Key points
                                                                                                                        • The RDR is not generating much positivity with IFAs
                                                                                                                          • Figure 51: RDR impact on IFA business, December 2011
                                                                                                                        • The impact of auto-enrolment is thought to be negligible
                                                                                                                          • Figure 52: Auto enrolment impact on IFA business, December 2011
                                                                                                                        • Shifting to focus to recurring income is top priority for IFAs in 2012
                                                                                                                          • Figure 53: Key business intentions over next 12 months, December 2011

                                                                                                                      Companies Covered

                                                                                                                      • Aegon UK
                                                                                                                      • Alexander Forbes
                                                                                                                      • Ally Financial Inc.
                                                                                                                      • Arts Council England
                                                                                                                      • Association of British Insurers
                                                                                                                      • Association of Consulting Actuaries
                                                                                                                      • Aviva Plc
                                                                                                                      • Bankhall Investment Associates Ltd
                                                                                                                      • Burns Anderson Independent Network PLC
                                                                                                                      • Canada Life Limited
                                                                                                                      • Fidelity Investment Services Limited
                                                                                                                      • Financial Services Authority (The)
                                                                                                                      • Honister Capital
                                                                                                                      • Investment Funds Direct Limited
                                                                                                                      • Jupiter Unit Trust Managers Ltd
                                                                                                                      • Just Retirement Ltd
                                                                                                                      • Legal & General Group PLC
                                                                                                                      • LV=
                                                                                                                      • MetLife Investors Insurance
                                                                                                                      • Money Portal Limited
                                                                                                                      • National Association of Pension Funds
                                                                                                                      • National Savings & Investments
                                                                                                                      • Openwork
                                                                                                                      • Pendragon plc
                                                                                                                      • Positive Solutions
                                                                                                                      • Premier Mortgage Services
                                                                                                                      • Prudential plc
                                                                                                                      • Scottish Equitable
                                                                                                                      • Sesame Bankhall Group Limited
                                                                                                                      • Sinfonia Asset Management
                                                                                                                      • Standard Life Assurance Company
                                                                                                                      • Sun Life Financial Inc.
                                                                                                                      • Tenet Group Ltd
                                                                                                                      • Zurich Financial Services

                                                                                                                      Pensions Intermediary Focus - UK - January 2012

                                                                                                                      £1,995.00 (Excl.Tax)