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Personal and Stakeholder Pensions - UK - March 2010

Focusing specifically on the personal pension and individual stakeholder pension segments of the individual pensions industry, this report details the key economic, demographic and regulatory trends influencing the market. In addition to identifying market strengths and weakness, key consumer trends and opportunities for growth are also highlighted. The final section of the report details the key findings of Mintel’s exclusively commissioned research on pensions.

  • A clear opportunity exists to encourage people to shift some of their savings into a personal pension: almost 40% of non-retired adults do not have any type of pension savings but do have at least one savings and investment product.
  • Saving in one pension alone is unlikely to be sufficient for most adults because of the decline in workplace pension benefits. Pension providers should be actively encouraging individuals with workplace arrangements to take advantage of saving in a personal pension.
  • Conflicting priorities often prevent people, especially younger individuals, from saving in a pension. A simple way to encourage pension savings would be to highlight the tax advantages: consumers need to understand that tax relief can greatly enhance even a small contribution.
  • Pension providers may want to encourage people to question whether property is really the best way to save for retirement: a quarter of people who prefer property to pensions have never considered if their savings would help ensure a comfortable retirement.
  • People who bank online are more engaged than average in retirement planning – nearly a quarter have reviewed their pension arrangements within the last couple years. Going forward it is clear that incorporating online management capabilities will need to be an essential element of any personal pension product or service offering.
  • When deciding to invest in a pension, people are making arrangements for their so called ‘future self”. By encouraging individuals to visualise their future, pension advertisers can get away from using fear tactics, making saving in a pension aspirational.

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Table of contents

  1. Issues in the Market

      • Key issues
        • Abbreviations
        • Future Opportunities

          • Saving from birth
            • A vision of future pension marketing campaigns
            • Market in Brief

              • New business levels down for second successive year
                • Figure 1: New APE* personal pension and individual stakeholder pension premiums, 2005-09
              • Economic uncertainty, poor fund performance and rising longevity
                • Internal market and regulatory developments
                  • Tied agents gaining a greater share of distribution
                    • Top five providers responsible for 54% of all business
                      • Personal pension adspend has doubled in the past year
                        • Competitive context
                          • Key consumer research findings
                            • Pension ownership
                              • Attitudes towards pensions
                                • Confidence in retirement savings
                                • Internal Market Environment

                                  • Key points
                                    • Private sector workplace pension provision continues to decline
                                      • Individual pension products can help fill the gap
                                        • Pension participation will recover with auto-enrolment in 2012
                                          • Market for individual pensions and NEST
                                            • Regulatory and legislative developments
                                              • FSA criticism of pension switching advice leads to decline in transfers
                                                • Limited pension tax relief for high earners from April 2011
                                                  • Government unpredictability
                                                    • Protected rights funds can now be put in any type of SIPP
                                                      • RDR will impact product design and distribution
                                                      • Broader Market Environment

                                                        • Key points
                                                          • Despite emerging from recession difficulties remain
                                                            • Pension industry should benefit from an increased focus on saving
                                                              • As longevity increases so could demand for personal pensions
                                                                • Figure 2: Cohort life expectancy at age 60, by gender, 1981-2056
                                                              • Save more or work longer
                                                                • Markets rallied in 2009 but many will never fully recover their pensions
                                                                  • Figure 3: FTSE 100 and FTSE All Share – daily index movements, February 2004-February 2010
                                                                • Pension tax relief will look more attractive as inflation and taxes rise
                                                                  • Figure 4: Monthly changes in the rate of annual inflation* and Bank of England base rate – UK, January 2007-January 2010
                                                              • Competitive Context

                                                                • Key points
                                                                  • Direct competition comes from workplace pensions
                                                                    • Number of occupational pensions down a fifth since 2004
                                                                      • Figure 5: Number of private sector occupational pension schemes in the UK, by scheme size, 2004-08
                                                                    • GPPs and company stakeholder pensions
                                                                      • Figure 6: New individual pension premiums, GPPs and company-sponsored stakeholder pensions, 2005-09
                                                                    • The National Employment Savings Trust (NEST)
                                                                      • Non-pension alternatives
                                                                        • ISAs
                                                                          • Figure 7: ISA sales, by type of ISA, 2003/04-2008/09
                                                                        • Property
                                                                          • Figure 8: New buy-to-let mortgage business, 2003-09
                                                                      • Swot

                                                                          • Figure 9: Market for personal and stakeholder pensions – SWOT analysis, 2010
                                                                      • Who’s Innovating?

                                                                        • Key points
                                                                          • Personal and stakeholder pension innovation is hard to come by
                                                                            • More firms launching pension ads targeting younger consumers
                                                                              • Aviva pensions TV ad campaign
                                                                                • Standard Life creates ‘Reality Check’ ad campaign
                                                                                  • Pru asking consumers how confident they are in their pensions
                                                                                    • The Standard Life ‘active money personal pension’
                                                                                      • Scottish Life simplifies Pension Portfolio personal pension product
                                                                                      • Market Size and Forecast

                                                                                        • Key points
                                                                                          • New business levels down significantly in 2009
                                                                                            • Figure 10: New individual personal pension and stakeholder pension premiums, 2005-09
                                                                                          • Stakeholder pensions losing their lustre
                                                                                            • Slowdown in transfers a factor behind decline in new business levels
                                                                                              • Figure 11: Single-premium transfer business, individual personal pensions and stakeholder pensions, 2006-09
                                                                                            • Marginal growth in the number of policies in force
                                                                                              • Figure 12: Total number of policies and regular premiums in force, individual personal pensions and stakeholder pensions, 2004-08
                                                                                            • Forecast
                                                                                              • Back to growth in 2011
                                                                                                • Figure 13: Forecast of new APE* premiums into individual personal pensions, 2004-14
                                                                                              • More focus on personal pensions likely going forward
                                                                                                • Factors used in the forecast
                                                                                                • Market Share

                                                                                                  • Key points
                                                                                                    • Aviva overtakes Lloyds at the top of the table
                                                                                                      • Figure 14: Ranking of individual pension providers, based on UK gross written premium, 2007 and 2008
                                                                                                    • Firms outside the top 20 find it difficult to compete
                                                                                                      • Many top providers also active in the occupational pensions market
                                                                                                      • Companies and Products

                                                                                                        • Major players
                                                                                                          • AEGON Scottish Equitable
                                                                                                            • Aviva plc
                                                                                                              • AXA (AXA Life)
                                                                                                                • Legal & General
                                                                                                                  • Lloyds TSB (Scottish Widows)
                                                                                                                  • Brand Communication and Promotion

                                                                                                                    • Key points
                                                                                                                      • Personal pension adspend more than doubles in the year to December 2009
                                                                                                                        • Figure 15: Pensions advertising expenditure, by sub-category, 2007-09
                                                                                                                      • Four fifths of all pension-related adspend goes through top ten advertisers
                                                                                                                        • Figure 16: Advertising expenditure by the top ten pensions advertisers, 2008 and 2009
                                                                                                                      • Specialist press publications main form of advertising media used
                                                                                                                        • Figure 17: Overview of media type used to advertise pensions-related products, 2009
                                                                                                                    • Channels to Market

                                                                                                                      • Key points
                                                                                                                        • Intermediaries play a key role in distribution
                                                                                                                          • Personal pensions
                                                                                                                            • Figure 18: Proportional distribution of new APE* premiums into personal pensions, by distribution channel, 2005-09
                                                                                                                          • Individual stakeholder pensions
                                                                                                                            • Figure 19: Proportional distribution of new APE* premiums into individual stakeholder pensions, by distribution channel, 2005-09
                                                                                                                        • The Consumer – Pension Ownership

                                                                                                                          • Key points
                                                                                                                            • One in ten non-retired adults own a personal pension
                                                                                                                              • Figure 20: Ownership of saving and investment products, December 2009
                                                                                                                            • Opportunities to encourage supplemental pension savings
                                                                                                                              • Figure 21: Cross-analysis of ownership of saving and investment products, December 2009
                                                                                                                            • Personal pension ownership jumps after age 35
                                                                                                                              • Figure 22: Ownership of saving and investment products, by age, December 2009
                                                                                                                            • Saving for a pension should be a top priority for younger people
                                                                                                                              • Personal pension ownership rises with income level and status
                                                                                                                                • Figure 23: Ownership of saving and investment products, by socio-economic group, December 2009
                                                                                                                                • Figure 24: Ownership of saving and investment products, by gross annual household income, December 2009
                                                                                                                            • The Consumer – Attitudes towards Pensions

                                                                                                                              • Key points
                                                                                                                                • Over a third agree that pensions are the best way to save for retirement...
                                                                                                                                  • Figure 25: Attitudes towards pensions, December 2009
                                                                                                                                • …but only two in five believe it is essential to save for retirement
                                                                                                                                  • Attitudes towards pensions and product ownership
                                                                                                                                    • Figure 26: Attitudes towards pension, by most popular ownership of saving and investment products, December 2009
                                                                                                                                  • Awareness of the need to save for retirement improves after 25
                                                                                                                                    • Figure 27: Attitudes towards pension, by gender and age, December 2009
                                                                                                                                  • ABC1s most clued up when it comes to retirement planning
                                                                                                                                    • Figure 28: Attitudes towards pension, by socio-economic status, December 2009
                                                                                                                                  • Greater earnings typically lead to greater engagement
                                                                                                                                    • Figure 29: Attitudes towards pension, by gross annual household income, December 2009
                                                                                                                                  • Those banking online more likely to be thinking of saving for retirement
                                                                                                                                    • Figure 30: Attitudes towards pension, by web use, December 2009
                                                                                                                                • The Consumer – Confidence in Retirement Savings

                                                                                                                                  • Key points
                                                                                                                                    • Very few see a comfortable retirement as a sure thing
                                                                                                                                      • Figure 31: Confidence that personal savings will provide a comfortable retirement, December 2009
                                                                                                                                    • Confidence in a comfortable retirement and product ownership
                                                                                                                                      • Figure 32: Confidence that personal savings will provide a comfortable retirement, by ownership of select saving and investment products, December 2009
                                                                                                                                    • Those aged 45-54 least likely to be confident in their prospects in retirement
                                                                                                                                      • Figure 33: Confidence that personal savings will provide a comfortable retirement, by gender, age, lifestage, marital status and region, December 2009
                                                                                                                                    • The earlier one starts saving, the more confident one will be
                                                                                                                                      • Tax relief should be promoted heavily
                                                                                                                                        • Homeowners and high earners most likely to be confident
                                                                                                                                          • Figure 34: Confidence that personal savings will provide a comfortable retirement, by socio-economic status, working status, gross annual household income and housing tenure, December 2009
                                                                                                                                        • Those banking online and reading broadsheets most bullish about their prospects
                                                                                                                                          • Figure 35: Confidence that personal savings will provide a comfortable retirement, by newspaper readership, internet usage frequency and web use, December 2009
                                                                                                                                      • The Consumer – Targeting Opportunities

                                                                                                                                        • Key points
                                                                                                                                          • Key target groups
                                                                                                                                            • Figure 36: Key pension target groups, December 2009
                                                                                                                                          • Passive pension believers
                                                                                                                                            • Non-committal
                                                                                                                                              • Pension devotees
                                                                                                                                                • Pension sceptics
                                                                                                                                                  • Prefer property
                                                                                                                                                    • Target groups by product ownership
                                                                                                                                                      • Figure 37: Ownership of saving and investment products, by target groups, December 2009
                                                                                                                                                    • Target groups: Confidence savings will provide a comfortable retirement
                                                                                                                                                      • Figure 38: Confidence that personal savings will provide a comfortable retirement, by target groups, December 2009
                                                                                                                                                  • Appendix – Market Background and Definitions

                                                                                                                                                    • Pension-based retirement planning
                                                                                                                                                      • Figure 39: Types of private pension provision in the UK, 2010
                                                                                                                                                    • Occupational schemes
                                                                                                                                                      • Individual pensions
                                                                                                                                                        • Group pensions
                                                                                                                                                          • Benefit structures
                                                                                                                                                            • Alternatively secured pensions
                                                                                                                                                              • Other definitions
                                                                                                                                                                • A-day
                                                                                                                                                                • Appendix – Broader Market Environment

                                                                                                                                                                    • Figure 40: Trends in the age structure of the UK population, by gender, 2004-14
                                                                                                                                                                    • Figure 41: Projected size of the UK population, by age band, 2008-58
                                                                                                                                                                    • Figure 42: Average gross weekly income of pensioner units*, by age, 2008/09
                                                                                                                                                                    • Figure 43: UK economic activity among people of pension age, by gender, 2002-08
                                                                                                                                                                • Appendix – The Consumer – Pension Ownership

                                                                                                                                                                    • Figure 44: Ownership of saving and investment products, by demographics, December 2009
                                                                                                                                                                • Appendix – The Consumer – Attitudes towards Pensions

                                                                                                                                                                    • Figure 45: Attitudes towards pensions, by demographics, December 2009
                                                                                                                                                                    • Figure 46: Attitudes towards pensions, by demographics, December 2009 (continued)
                                                                                                                                                                • Appendix – The Consumer – Confidence in Retirement Savings

                                                                                                                                                                    • Figure 47: Confidence that personal savings will provide a comfortable retirement, December 2009
                                                                                                                                                                    • Figure 48: Confidence that personal savings will provide a comfortable retirement, by demographics, December 2009
                                                                                                                                                                • Appendix – The Consumer – Targeting Opportunities

                                                                                                                                                                    • Figure 49: Attitudes towards pensions, by target groups, December 2009
                                                                                                                                                                    • Figure 50: Target groups, by demographics, December 2009

                                                                                                                                                                Companies Covered

                                                                                                                                                                • Abbey
                                                                                                                                                                • Aegon UK
                                                                                                                                                                • Asda Group Ltd
                                                                                                                                                                • Association of British Insurers
                                                                                                                                                                • Aviva Plc
                                                                                                                                                                • AWD Wealth Management
                                                                                                                                                                • AXA PPP healthcare
                                                                                                                                                                • AXA UK plc
                                                                                                                                                                • Bank of England
                                                                                                                                                                • Bankhall Investment Associates Ltd
                                                                                                                                                                • Barclays Bank plc
                                                                                                                                                                • Bright Grey
                                                                                                                                                                • Britannic Group Plc
                                                                                                                                                                • Burns Anderson Independent Network PLC
                                                                                                                                                                • Cadbury Schweppes Plc
                                                                                                                                                                • Century Life Assurance Company
                                                                                                                                                                • Chartered Institute of Personnel and Development [CIPD]
                                                                                                                                                                • Clerical Medical Investment Group Ltd
                                                                                                                                                                • Co-operative Group
                                                                                                                                                                • Co-operative Insurance Society Ltd
                                                                                                                                                                • Council of Mortgage Lenders
                                                                                                                                                                • Department for Work and Pensions
                                                                                                                                                                • Deutsche Bank AG
                                                                                                                                                                • Diageo UK
                                                                                                                                                                • Fidelity Investment Services Limited
                                                                                                                                                                • Financial Services Authority (The)
                                                                                                                                                                • Freeview
                                                                                                                                                                • Friends Provident plc
                                                                                                                                                                • Government Actuary's Department (GAD)
                                                                                                                                                                • Hargreaves Lansdown Plc
                                                                                                                                                                • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                                                • HSBC Private Bank (UK) Limited
                                                                                                                                                                • Institute of Financial Planning
                                                                                                                                                                • Kingfisher UK & Ireland
                                                                                                                                                                • Legal & General Assurance Society Limited
                                                                                                                                                                • Lighthouse Group Plc
                                                                                                                                                                • Lloyds Banking Group
                                                                                                                                                                • Lloyds TSB Insurance
                                                                                                                                                                • London Stock Exchange plc
                                                                                                                                                                • LV=
                                                                                                                                                                • Market & Opinion Research International (MORI)
                                                                                                                                                                • Marks & Spencer
                                                                                                                                                                • MetLife Investors Insurance
                                                                                                                                                                • National Association of Pension Funds
                                                                                                                                                                • National Lottery Commission
                                                                                                                                                                • National Savings & Investments
                                                                                                                                                                • Nationwide Building Society
                                                                                                                                                                • Norwich Union
                                                                                                                                                                • Old Mutual plc
                                                                                                                                                                • Park Row Associates
                                                                                                                                                                • Post Office Limited
                                                                                                                                                                • Principality Building Society
                                                                                                                                                                • Prudential plc
                                                                                                                                                                • Resolution plc
                                                                                                                                                                • Royal Albert Hall
                                                                                                                                                                • Royal Bank of Scotland Group plc
                                                                                                                                                                • Scottish Equitable
                                                                                                                                                                • Scottish Life
                                                                                                                                                                • Scottish Mutual
                                                                                                                                                                • Scottish Widows Bank plc
                                                                                                                                                                • Sesame
                                                                                                                                                                • Skandia UK
                                                                                                                                                                • St Andrew's Group
                                                                                                                                                                • St James' Place Plc
                                                                                                                                                                • Standard Life Assurance Company
                                                                                                                                                                • Suffolk Life
                                                                                                                                                                • Swiss Re
                                                                                                                                                                • Tenet Group Ltd
                                                                                                                                                                • Tesco Plc
                                                                                                                                                                • UBS Wealth Management UK Ltd
                                                                                                                                                                • UK Athletics
                                                                                                                                                                • Windsor Life Assurance Co Ltd
                                                                                                                                                                • Winterthur Life UK Limited
                                                                                                                                                                • Zurich Financial Services

                                                                                                                                                                Personal and Stakeholder Pensions - UK - March 2010

                                                                                                                                                                US $2,570.96 (Excl.Tax)