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Personal and Stakeholder Pensions - UK - April 2015

“Concerns have been raised that the new pension freedoms will lead to many making poor decisions when they come to access their pensions in retirement. However, Mintel’s research suggests that consumers should be given more credit. Many are aware of the potential dangers and will likely cautiously evaluate their options, and take advantage of the Pension Wise service, before making any decisions. Indeed, only 4% say they have already made changes as a result of the new pension rules.”
– George Zaborowski, Senior Analyst – Financial Services

This report covers the following areas:

  • How much can the market really gain from pension freedoms legislation?
  • Are people responsible enough to handle their new pension freedoms? 
  • The workplace may be an ideal place to promote personal pensions

The UK pension landscape continues to be transformed by major regulatory change. In the past few years, the phased introduction of auto-enrolment has helped to reverse a decade-long decline in workplace pension participation, while rules linked to the Retail Distribution Review (RDR) have altered the way pensions can be bought and sold. However, the implementation of new pension freedoms is arguably the biggest change yet.

From 6 April 2015 individuals with a defined-contribution personal or occupational pension will have much greater control over what they can do with their accumulated pot once they reach the age of 55. This increased flexibility has the potential to revitalise interest in personal and individual stakeholder pensions, which have been adversely impacted by previous legislative changes.

In this report Mintel explores how the personal and individual stakeholder pension market segments are being affected by a continually evolving market environment. This includes an analysis of the threats and opportunities associated with new regulation, as well as the impact of an improving economic environment on consumer finances. The Market Size and Forecast and Channels to Market sections detail how these factors are influencing market performance and distribution patterns. In addition, this report explores consumer attitudes and behaviour in relation to pensions and retirement saving, and looks at how confident people are about their retirement prospects. Special attention is also paid to how well people understand the major pension legislative changes afoot, and whether or not they will have an effect on their retirement plans.

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • The market
            • Regular-premium business expected to remain flat over the next five years
              • Figure 1: Forecast of new personal and stakeholder pension business (regular premiums only) – Fan chart, 2009-19
            • Rise in transfer business boosts new single premiums
              • Figure 2: New personal and individual stakeholder pension business – Regular and single premiums, 2010-14
            • Most sales generated via independent advisers
              • Market factors
                • Savings still a priority as wages start to grow ahead of inflation
                  • Auto-enrolment has hurt new business prospects
                    • Competition from other retirement planning products has intensified
                      • Pension freedoms legislation has made saving in a pension much more attractive
                        • Companies, brands and innovation
                          • Top five personal pension providers control over two thirds of the market
                            • Changes in regulatory landscape continue to drive adspend
                              • Product development motivated by regulatory change
                                • The consumer
                                  • Just 15% of non-retired adults regularly contributing to a personal pension
                                    • Figure 3: Active pension ownership, by scheme type, December 2014
                                  • Employers playing an influential role in pension product ownership
                                    • Figure 4: Key factors influencing decision to take out a pension plan, December 2014
                                  • Few have saved enough to retire comfortably
                                    • Figure 5: Value of retirement savings, December 2014
                                  • Many aware of pension freedoms legislation, but understanding needs to be improved
                                    • Figure 6: Awareness of changes to pension income regulation, December 2014
                                  • Few have already changed their plans in reaction to new pension freedoms
                                    • Figure 7: Impact of changes in pension income regulation on retirement plans, December 2014
                                  • UK savers welcome having more choice with pension savings
                                    • Figure 8: Level of agreement with statements about saving for retirement and pensions, December 2014
                                  • Confidence in ability to save for retirement
                                    • Figure 9: Level of agreement with statements about confidence in ability to save for retirement, December 2014
                                  • What we think
                                  • Issues and Insights

                                      • How much can the market really gain from pension freedoms legislation?
                                        • The facts
                                          • The implications
                                            • Are people responsible enough to handle their new pension freedoms?
                                              • The facts
                                                • The implications
                                                  • The workplace may be an ideal place to promote personal pensions
                                                    • The facts
                                                      • The implications
                                                      • Trend Application

                                                        • The entrepreneurial tech-savvy retiree
                                                          • Improving engagement with pensions via automation
                                                            • Trustworthiness now even more important under new pension rules
                                                            • Market Drivers

                                                              • Key points
                                                                • Improving economy contributing to long-awaited real growth in wages
                                                                  • Figure 10: Financial wellbeing index, 2009-15
                                                                • People are ready to spend but saving remains a top priority
                                                                  • Figure 11: Spending over the last three months and spending plans over the next three months, February 2015
                                                                • SIPPs gaining mass-market appeal
                                                                  • Figure 12: Volume and value of new SIPP business, 2010-14
                                                                • ISAs continue to be an attractive pension alternative
                                                                  • Figure 13: Number of ISAs and amounts subscribed, segmented by component type, 2005/06-2013/14
                                                                • Auto-enrolment has reversed decline in workplace pension participation
                                                                  • Pension freedoms legislation boosts the appeal of pensions
                                                                    • Concerns raised about the dangers of too much freedom
                                                                      • Introduction of a flat rate of tax relief being discussed
                                                                      • Who’s Innovating?

                                                                        • Key points
                                                                          • Regulation and technological advances drive product development
                                                                            • AEGON introduces new at-retirement website and adviser tool
                                                                              • Scottish Widows sets up new retirement website
                                                                                • HSBC launches retirement range of risk-managed funds for defined-contribution pensions
                                                                                  • The High Income fund from AEGON
                                                                                    • AEGON’s ‘direct retirement’ platform retiready.co.uk
                                                                                      • Nutmeg enters personal pensions with its unique approach to investing
                                                                                      • Market Size and Forecast

                                                                                        • Key points
                                                                                          • Sharp decline in new regular and single premiums subsides in 2014
                                                                                            • Figure 14: New personal pension and individual stakeholder pension business, 2010-14
                                                                                          • Transfer business up by 13% in 2014
                                                                                            • Figure 15: Transfers as a share of new personal and individual stakeholder business, 2010-14
                                                                                          • Five-year forecast of the value of regular-premium business
                                                                                            • Figure 16: Forecast of new personal and stakeholder pension business (regular premiums only) – Fan chart, 2009-19
                                                                                            • Figure 17: Forecast of new regular-premium personal pension and individual stakeholder pension business, 2009-19
                                                                                          • Forecast methodology
                                                                                            • Fan chart explanation
                                                                                            • Market Share

                                                                                              • Key points
                                                                                                • Lloyds Banking Group moves into the top spot in the rankings
                                                                                                  • Figure 18: Ranking of individual pension providers – UK, by GWP relating to total individual pension business, 2012 and 2013
                                                                                              • Companies and Products

                                                                                                  • Lloyds Banking Group
                                                                                                    • Company description
                                                                                                      • Pension portfolio
                                                                                                        • Distribution
                                                                                                          • Key financial data
                                                                                                            • Figure 19: Lloyds Banking Group insurance division full-year results, 2013 and 2014
                                                                                                          • Recent activity
                                                                                                            • AEGON
                                                                                                              • Company description
                                                                                                                • Pension portfolio
                                                                                                                  • Distribution
                                                                                                                    • Key financial data
                                                                                                                      • Figure 20: Full-year results for UK business of AEGON Group, 2013 and 2014
                                                                                                                    • Recent activity
                                                                                                                      • Aviva
                                                                                                                        • Company description
                                                                                                                          • Pension portfolio
                                                                                                                            • Distribution
                                                                                                                              • Key financial data
                                                                                                                                • Figure 21: Aviva plc value of new UK life and pensions business, 2013 and 2014
                                                                                                                                • Figure 22: Aviva plc UK long-term business market performance, 2012 and 2013
                                                                                                                              • Recent activity
                                                                                                                                • Standard Life
                                                                                                                                  • Company description
                                                                                                                                    • Pension portfolio
                                                                                                                                      • Distribution
                                                                                                                                        • Key financial data
                                                                                                                                          • Figure 23: Full-year financial data for Standard Life, 2013 and 2014
                                                                                                                                        • Recent activity
                                                                                                                                          • Royal London Mutual
                                                                                                                                            • Company description
                                                                                                                                              • Pension portfolio
                                                                                                                                                • Distribution
                                                                                                                                                  • Key financial data
                                                                                                                                                    • Figure 24: Royal London Mutual value of new UK life and pensions business, 2013 and 2014
                                                                                                                                                    • Figure 25: Full-year results for Royal London Mutual, 2012 and 2013
                                                                                                                                                  • Recent activity
                                                                                                                                                  • Brand Communication and Promotion

                                                                                                                                                    • Key points
                                                                                                                                                      • Advertising expenditure on pensions up by a quarter in 2014
                                                                                                                                                        • Figure 26: Total advertising expenditure on pension products (excluding annuities), 2010-14
                                                                                                                                                      • Personal and stakeholder pension advertising up by nearly a third
                                                                                                                                                        • Figure 27: Total advertising expenditure on pension and retirement income products, by sub-category, 2010-14
                                                                                                                                                      • Half of all adspend attributable to the DWP
                                                                                                                                                        • Figure 28: Top 10 advertisers of pension products (including retirement income products), 2012-14
                                                                                                                                                      • Large majority of advertising money spend on TV and press ads
                                                                                                                                                        • Figure 29: Total advertising expenditure on pension and retirement income product, by media type, 2012-14
                                                                                                                                                      • A note on adspend
                                                                                                                                                      • Channels to Market

                                                                                                                                                        • Key points
                                                                                                                                                          • The RDR has changed how sales are categorised
                                                                                                                                                            • Majority of personal pension business sold via independent advisers
                                                                                                                                                              • Figure 30: New personal pension business, by sales channel, 2013 and 2014
                                                                                                                                                              • Figure 31: New personal pension business, by sales channel, 2013 and 2014
                                                                                                                                                            • More than a quarter of individual stakeholder pension sales non-advised
                                                                                                                                                              • Figure 32: New individual stakeholder pension business, by sales channel, 2013 and 2014
                                                                                                                                                              • Figure 33: New individual stakeholder pension business, by sales channel, 2013 and 2014
                                                                                                                                                          • Active Pension Ownership

                                                                                                                                                            • Key points
                                                                                                                                                              • Only a minority of adults actively contributing to a personal pension
                                                                                                                                                                • Figure 34: Active pension ownership, by scheme type, 2012-14
                                                                                                                                                                • Figure 35: Active pension ownership, by gender and age, December 2014
                                                                                                                                                              • New pension freedoms should boost personal pension ownership
                                                                                                                                                                • Higher earners now have even more incentive to save in a pension
                                                                                                                                                                  • Figure 36: Active pension ownership, by gross annual household income, December 2014
                                                                                                                                                                • Self-employed remain a key target market for personal pensions
                                                                                                                                                                  • Figure 37: Active pension ownership, by working status, December 2014
                                                                                                                                                              • Key Factors Influencing Decision to Open a Pension

                                                                                                                                                                • Key points
                                                                                                                                                                  • Employers are driving the take-up of pensions
                                                                                                                                                                    • Figure 38: Key factors influencing decision to take out a pension plan, December 2014
                                                                                                                                                                  • Own research the top factor driving personal pension ownership
                                                                                                                                                                    • Figure 39: Key factors influencing decision to take out a pension plan, by active ownership of select pensions, December 2014
                                                                                                                                                                  • Promoting personal pensions via the workplace
                                                                                                                                                                  • Value of Retirement Savings

                                                                                                                                                                    • Key points
                                                                                                                                                                      • Few have accumulated significant amounts of retirement savings
                                                                                                                                                                        • Figure 40: Value of retirement savings, December 2014
                                                                                                                                                                      • Lack of savings forcing many to delay retirement
                                                                                                                                                                        • Figure 41: Value of retirement savings, by gender and age, December 2014
                                                                                                                                                                      • Savings levels highest among personal pension owners
                                                                                                                                                                        • Figure 42: Value of retirement savings, by active ownership of select pensions, December 2014
                                                                                                                                                                        • Figure 43: Value of retirement savings, by working status, December 2014
                                                                                                                                                                      • Improving engagement the key to boosting savings levels
                                                                                                                                                                      • Awareness of Changes to Pension Income Legislation

                                                                                                                                                                        • Key points
                                                                                                                                                                          • Two thirds of adults aware of the 2014 Budget changes to pensions
                                                                                                                                                                            • Figure 44: Awareness and understanding of changes to pension income legislation, December 2014
                                                                                                                                                                          • Awareness and understanding highest among retirees
                                                                                                                                                                            • Figure 45: Awareness and understanding of changes to pension income legislation, by age, working status and gross annual household income, December 2014
                                                                                                                                                                          • Personal pension owners most aware of new pension freedoms
                                                                                                                                                                            • Figure 46: Awareness and understanding of changes to pension income legislation, by active ownership of select pensions, December 2014
                                                                                                                                                                        • Impact of Pension Legislation on Retirement Plans

                                                                                                                                                                          • Key points
                                                                                                                                                                            • Only a minority are ready to adapt their retirement plans in response to the new rules
                                                                                                                                                                              • Figure 47: Impact of changes in pension income legislation on retirement plans, December 2014
                                                                                                                                                                            • Younger adults most inclined to make changes
                                                                                                                                                                              • Figure 48: Impact of changes in pension income legislation on retirement plans, by age, December 2014
                                                                                                                                                                            • Non-retired over-45s will need the most help in the near term
                                                                                                                                                                              • Those with £50,000 plus in savings twice as likely to have changed plans
                                                                                                                                                                                • Figure 49: Impact of changes in pension income legislation on retirement plans, by value of retirement savings, December 2014
                                                                                                                                                                              • Personal pension owners are most open to adjusting their plans
                                                                                                                                                                                • Figure 50: Impact of changes in pension income legislation on retirement plans, by active ownership of select pensions, December 2014
                                                                                                                                                                            • Attitudes towards Saving for Retirement and Pensions

                                                                                                                                                                              • Key points
                                                                                                                                                                                • British public strongly behind the notion of greater pension freedoms
                                                                                                                                                                                  • Figure 51: Attitudes towards saving for retirement and pensions, December 2014
                                                                                                                                                                                • Higher earners most wary about pitfalls of easier access to funds
                                                                                                                                                                                  • Figure 52: Level of agreement with statement ‘I’m worried that easier access to pension funds will mean that people will waste the money’, by gross annual household income, December 2014
                                                                                                                                                                                • Frequent rule changes make planning for retirement more difficult
                                                                                                                                                                                  • Many still need convincing that saving in a pension is the best option
                                                                                                                                                                                    • Pension owners more aware they can’t totally rely on the government
                                                                                                                                                                                      • Figure 53: Agreement with statements about saving for retirement and pensions, by active ownership of select pensions, December 2014
                                                                                                                                                                                  • Confidence in Ability to Save for Retirement

                                                                                                                                                                                    • Key points
                                                                                                                                                                                      • Many adults are worried about their prospects in retirement
                                                                                                                                                                                        • Figure 54: Level of agreement with statements about confidence in ability to save for retirement, December 2014
                                                                                                                                                                                      • Apathy preventing many from taking action
                                                                                                                                                                                        • People need to be shocked into action
                                                                                                                                                                                          • 35-44-year-olds the most likely to be worried
                                                                                                                                                                                            • Figure 55: Level of agreement with statements about confidence in ability to save for retirement, by gender and age, December 2014
                                                                                                                                                                                          • Those in the family lifestage need simple low-cost solutions
                                                                                                                                                                                            • Owning a pension on its own not enough to ease concerns…
                                                                                                                                                                                              • Figure 56: Agreement with statements about confidence in ability to save for retirement, by active ownership of select pensions, December 2014
                                                                                                                                                                                            • …but having more money helps
                                                                                                                                                                                              • Figure 57: Agreement with statements about confidence in ability to save for retirement, by value of retirement savings, December 2014
                                                                                                                                                                                              • Figure 58: Level of agreement with statements about confidence in ability to save for retirement, by gross annual household income, December 2014
                                                                                                                                                                                          • Appendix – Market Size and Forecast

                                                                                                                                                                                              • Figure 59: Forecast of new personal and individual stakeholder pension business (regular premiums only) – Best- and worst-case scenario, 2014-19

                                                                                                                                                                                          Companies Covered

                                                                                                                                                                                          To learn more about the companies covered in this report please contact us.

                                                                                                                                                                                          Personal and Stakeholder Pensions - UK - April 2015

                                                                                                                                                                                          US $2,583.33 (Excl.Tax)