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Personal and Stakeholder Pensions - UK - March 2013

“With RDR-related reforms set to make independent advice increasingly harder to come by for many consumers, rising interest in the ability to manage and monitor pensions online among younger savers can be seen as an encouraging sign. It suggests that savers are becoming increasingly more comfortable managing their own finances and may potentially be more willing to buy pension products directly in the future.”
– George Zaborowski, Senior Analyst – Financial Services
Some questions answered in this report include:

  • Is the start of pension auto-enrolment a threat or an opportunity?
  • As the market evolves where will personal pensions fit in?
  • How important is a well-known pension brand to consumers?
  • What types of features will future savers look for in a pension?

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • The market
            • Little prospect for growth over the next five years
              • Figure 1: Forecast of new personal and individual stakeholder pension business (regular premiums only) – fan chart, 2007-17
            • New single-premium business supported by pension transfers
              • Figure 2: New personal and individual stakeholder pension business – regular and single premiums, 2008-12
            • Pension auto-enrolment increases competitive pressures
              • Intermediaries dominate distribution
                • Market factors
                  • Economic slowdown deflecting attention from longer-term financial goals
                    • Recent regulatory developments
                      • Companies, brands and innovation
                        • With Aviva at the top, the top five providers control two thirds of the market
                          • Adspend on pensions boosted by introduction of auto-enrolment in 2012
                            • Recent product development has been driven by the RDR
                              • The consumer
                                • Less than three in five non-retired adults contributing to any type of pension
                                  • Figure 3: Active pension ownership and retirement savings, December 2012
                                • Most have retirement savings valued at less than £30,000
                                  • Figure 4: Value of retirement savings, December 2012
                                • Simple annual statements and low costs the most important pension features
                                  • Figure 5: What consumers look for in a personal pension, December 2012
                                • The internet and IFAs the most common choices for pension advice
                                  • Figure 6: Sources of pension advice, December 2012
                                • Consumers have mixed feelings towards retirement and pensions
                                  • Figure 7: Agreement with statements about saving for retirement and pensions, December 2012
                                • What we think
                                • Issues in the Market

                                    • Is the start of pension auto-enrolment a threat or an opportunity?
                                      • As the market evolves where will personal pensions fit in?
                                        • How important is a well-known pension brand to consumers?
                                          • What types of features will future savers look for in a pension?
                                          • Trend Application

                                            • Staying on the right path towards retirement
                                              • Young savers with grown-up attitudes
                                                • Mintel Futures: Generation Next
                                                • Market Drivers

                                                  • Key points
                                                    • Up and down economy keeps the focus on near-term financial priorities
                                                      • Figure 8: Quarterly changes in GDP* and the savings ratio**, 1998-Q3 2012
                                                    • Inflation is easing but average wages are not rising
                                                      • Figure 9: Monthly change in RPI and average weekly earnings, January 2009-December 2012
                                                    • Poor annuity rates act as a disincentive to saving in a pension
                                                      • Latest regulatory developments
                                                        • RDR reforms now in effect
                                                          • Pension auto-enrolment raising the profile of pensions
                                                            • Flat-rate state pension set to be introduced in 2017
                                                              • Maximum value of pension contributions set to be pulled back further
                                                              • Competitor Products

                                                                • Key points
                                                                  • Competing pension products
                                                                    • New occupational DC pension business falls in 2012
                                                                      • Figure 10: New insurer-administered DC occupational pension business (volume and value), 2008-12
                                                                    • Growth in new GPP business continues
                                                                      • Figure 11: Number of new individual pension contracts (including GPPs), by type of product, 2008-12
                                                                    • Wealthy choosing SIPPs over the more basic individual pensions
                                                                      • Figure 12: Value of new individual pension business (including GPPs), by premium, 2008-12
                                                                    • Non-pension alternatives
                                                                      • 2011/12 tax year ISA contributions stagnate
                                                                        • Figure 13: Value of ISA sales, by type of ISA, 2006/07-2011/12
                                                                        • Figure 14: Volume and value of ISA subscriptions, by type of ISA, 2006/07-2011/12
                                                                      • Many Britons prefer property to pensions
                                                                      • SWOT Analysis

                                                                          • Figure 15: Personal and stakeholder pensions – SWOT analysis, 2013
                                                                      • Who’s Innovating?

                                                                        • Key points
                                                                          • Pensions evolve with regulatory changes and technological advances
                                                                            • RDR drives changes in personal and individual stakeholder products
                                                                              • Aviva and AEGON reorganise and refresh
                                                                                • RDR pushing some IFAs to start experimenting with ‘digital’ advice
                                                                                  • Pensions Wizard from Wake up your Wealth – ‘Algorithm-based Advice’
                                                                                    • IFA firm Informed Choice set to launch IC Direct
                                                                                    • Market Size and Forecast

                                                                                      • Key points
                                                                                        • Regular-premium business falls sharply in 2012
                                                                                          • Figure 16: New personal pension and individual stakeholder pension business, 2008-12
                                                                                        • Transfers continue to artificially support new single-premium business
                                                                                          • Figure 17: Transfers as a share of new personal and individual stakeholder pension business, 2008-12
                                                                                        • Five-year forecast of overall regular premiums
                                                                                          • Figure 18: Forecast of new personal and individual stakeholder pension business (regular premiums only) – fan chart, 2007-17
                                                                                          • Figure 19: Forecast of new regular-premium personal pension and individual stakeholder pension business, 2007-17
                                                                                        • Forecast methodology
                                                                                          • Fan chart explanation
                                                                                          • Market Share

                                                                                            • Key points
                                                                                              • Aviva holds on to its top position in the rankings in 2011
                                                                                                • Figure 20: Ranking of individual pension providers – UK, by GWP relating to total individual pension and income drawdown business, 2010 and 2011
                                                                                            • Companies and Products

                                                                                                • Aviva
                                                                                                  • Standard Life
                                                                                                    • AEGON UK
                                                                                                      • Lloyds Banking Group
                                                                                                        • Friends Life
                                                                                                        • Brand Communication and Promotion

                                                                                                          • Key points
                                                                                                            • Introduction of auto-enrolment provides a boost to pension adspend
                                                                                                              • Figure 21: Total advertising expenditure on pension products and services (excluding annuities), 2008-12
                                                                                                            • Personal and stakeholder pension advertising rises by two thirds in 2012
                                                                                                              • Figure 22: Total advertising expenditure on pension and retirement income product, by sub-category, 2008-12
                                                                                                            • DWP top advertiser of pensions in 2012
                                                                                                              • Figure 23: Top five advertisers of pension products and services, 2010-12
                                                                                                          • Channels to Market

                                                                                                            • Key points
                                                                                                              • Most individual pensions sales are via intermediaries
                                                                                                                • IFAs maintain their dominance in personal pension sales
                                                                                                                  • Figure 24: New personal pension business, by sales channel, 2008-12
                                                                                                                • Direct sales the only channel to see growth in stakeholder business in 2012
                                                                                                                  • Figure 25: New individual stakeholder pension business, by sales channel, 2008-12
                                                                                                              • Active Pension Ownership and Retirement Savings

                                                                                                                • Key points
                                                                                                                  • Just one in seven regularly contribute to an individual pension
                                                                                                                    • Figure 26: Active pension ownership and retirement savings, December 2012
                                                                                                                  • Auto-enrolment – an opportunity or a threat?
                                                                                                                    • Incentive to save in a pension is particularly strong for higher earners
                                                                                                                      • Figure 27: Active pension ownership and retirement savings, by highest rate of income tax paid, December 2012
                                                                                                                    • Individual pensions will remain attractive for the self-employed
                                                                                                                      • Figure 28: Active pension ownership and retirement savings, by gender and working status, December 2012
                                                                                                                    • Lack of retirement savings among women points to an opportunity
                                                                                                                    • Value of Retirement Savings

                                                                                                                      • Key points
                                                                                                                        • Retirement savings primarily concentrated at values below £30,000
                                                                                                                          • Figure 29: Value of retirement savings, December 2012
                                                                                                                        • A large proportion of over-45s will have to play catch-up
                                                                                                                          • Figure 30: Value of retirement savings, by gender and age, December 2012
                                                                                                                        • Promoting the peace of mind of getting ahead of the game early on in life
                                                                                                                          • Pension tax relief makes it easier for higher earners to accumulate funds
                                                                                                                            • Figure 31: Value of retirement savings, by highest rate of income tax paid, December 2012
                                                                                                                          • Individual pension owners most likely to have £30K+ in savings
                                                                                                                            • Figure 32: Value of retirement savings, by pension and retirement savings ownership, December 2012
                                                                                                                        • What Consumers Look for in a Personal Pension

                                                                                                                          • Key points
                                                                                                                            • Simplicity and cost efficiency most important to pension savers
                                                                                                                              • Figure 33: What consumers look for in a personal pension, December 2012
                                                                                                                            • Interest in professional management and choice linked to wealth
                                                                                                                              • Figure 34: Level of agreement with selected statements on what consumers look for in a personal pension, December 2012
                                                                                                                            • The importance of a well-known brand tends to diminish over time
                                                                                                                              • Control over contributions more important than control over investments
                                                                                                                                • Figure 35: Level of agreement with selected statements on what consumers look for in a personal pension, December 2012
                                                                                                                              • A flexible approach attractive for younger people and high earners
                                                                                                                                • Interest in the ability to manage and monitor pensions online set to grow
                                                                                                                                • Sources of Pension Advice

                                                                                                                                  • Key points
                                                                                                                                    • The internet and IFAs the most popular choices for pension advice
                                                                                                                                      • Figure 36: Sources of pension advice, December 2012
                                                                                                                                    • Source of pension advice changes with age
                                                                                                                                      • Figure 37: Sources of pension advice, by age and gender, December 2012
                                                                                                                                    • Among those who would use just one source, IFAs come out on top
                                                                                                                                      • Figure 38: Repertoire* on sources of pension advice, December 2012
                                                                                                                                    • For most, independent pension advice is out of reach
                                                                                                                                      • Figure 39: Sources of pension advice, by value of retirement savings, December 2012
                                                                                                                                    • With auto-enrolment more will go to employers for pension advice
                                                                                                                                      • Figure 40: Sources of pension advice, by pension ownership and retirement savings, December 2012
                                                                                                                                  • Attitudes towards Saving for Retirement

                                                                                                                                    • Key points
                                                                                                                                      • Fewer than two in five agree that saving for retirement is a priority
                                                                                                                                        • Figure 41: Level of agreement with statements about saving for retirement, December 2012
                                                                                                                                      • Confidence of a comfortable retirement dwindles with age
                                                                                                                                        • Figure 42: Level of agreement with statements about saving for retirement, by gender and age, December 2012
                                                                                                                                      • Wealthy are more positive but not overwhelmingly confident either
                                                                                                                                        • Coming of age during a crisis a blessing in disguise
                                                                                                                                          • Helping people to stay on the right path to retirement
                                                                                                                                            • Those who own a pension tend to have more favourable attitudes
                                                                                                                                              • Figure 43: Level of agreement with statements about saving for retirement, by pension ownership and retirement savings, December 2012
                                                                                                                                          • Attitudes towards Saving in a Pension

                                                                                                                                            • Key points
                                                                                                                                              • Consumers generally show little interest in pensions…
                                                                                                                                                • Figure 44: Level of agreement with statements about saving in a pension, December 2012
                                                                                                                                              • …but 55% agree that early access would make them more appealing
                                                                                                                                                • Under-35s the most inclined to want to manage their own pensions
                                                                                                                                                  • Figure 45: Level of agreement with statements about saving in a pension, by gender and age, December 2012
                                                                                                                                                • Existing pension owners broadly more positive but this can be improved
                                                                                                                                                  • Figure 46: Level of agreement with statements about saving in a pension, by pension ownership and retirement savings, December 2012
                                                                                                                                              • Appendix – Market Forecast

                                                                                                                                                • Best and worst case scenario forecast
                                                                                                                                                  • Figure 47: Forecast of new personal and individual stakeholder pension business (regular premiums only) Best and worst case scenario, 2012-17
                                                                                                                                              • Appendix – Active Pension Ownership and Retirement Savings

                                                                                                                                                  • Figure 48: Active pension ownership and retirement savings, by demographics, December 2012
                                                                                                                                                  • Figure 49: Active pension ownership and retirement savings, by demographics, December 2012 (continued)
                                                                                                                                                  • Figure 50: Active pension ownership and retirement savings, by demographics, December 2012 (continued)
                                                                                                                                                  • Figure 51: Active pension ownership and retirement savings among non-retired adults, by demographics, December 2012
                                                                                                                                                  • Figure 52: Active pension ownership and retirement savings among non-retired adults, by demographics, December 2012 (continued)
                                                                                                                                                  • Figure 53: Active pension ownership and retirement savings among non-retired adults, by demographics, December 2012 (continued)
                                                                                                                                                  • Figure 54: Active pension ownership and retirement savings, by type of pension owned, December 2012
                                                                                                                                              • Appendix – Value of Retirement Savings

                                                                                                                                                  • Figure 55: Value of retirement savings, by demographics, December 2012
                                                                                                                                                  • Figure 56: Value of retirement savings, by demographics, December 2012 (continued)
                                                                                                                                                  • Figure 57: Pension ownership and retirement savings, by value of retirement savings, December 2012
                                                                                                                                              • Appendix – What Consumers Look for in a Personal Pension

                                                                                                                                                  • Figure 58: What consumers look for in a pension – easy-to-understand annual statements, by demographics, December 2012
                                                                                                                                                  • Figure 59: What consumers look for in a pension – low fees and charges, by demographics, December 2012
                                                                                                                                                  • Figure 60: What consumers look for in a pension – the ability to vary contribution levels as I please, by demographics, December 2012
                                                                                                                                                  • Figure 61: What consumers look for in a pension – managed by an investment professional, by demographics, December 2012
                                                                                                                                                  • Figure 62: What consumers look for in a pension – access to a wide variety of investment types, by demographics, December 2012
                                                                                                                                                  • Figure 63: What consumers look for in a pension – the ability to make lump-sum contributions, by demographics, December 2012
                                                                                                                                                  • Figure 64: What consumers look for in a pension – the ability to manage how pension is invested, by demographics, December 2012
                                                                                                                                                  • Figure 65: What consumers look for in a pension – the ability to monitor pension online, by demographics, December 2012
                                                                                                                                                  • Figure 66: What consumers look for in a pension – a well-known brand, by demographics, December 2012
                                                                                                                                              • Appendix – Sources of Pension Advice

                                                                                                                                                  • Figure 67: Sources of pension advice, by demographics, December 2012
                                                                                                                                                  • Figure 68: Sources of pension advice, by demographics, December 2012 (continued)
                                                                                                                                                  • Figure 69: Repertoire on sources of pension advice, by demographics, December 2012
                                                                                                                                              • Appendix – Attitudes towards Saving for Retirement

                                                                                                                                                  • Figure 70: Agreement with the statements ‘I am happy to lock up some of my savings until retirement’ and ‘Saving for retirement is a priority for me’, by demographics, December 2012
                                                                                                                                                  • Figure 71: Agreement with the statement ‘I’m confident I’ll be able to save enough to retire comfortably’, by demographics, December 2012
                                                                                                                                              • Appendix – Attitudes towards Saving in a Pension

                                                                                                                                                  • Figure 72: Agreement with the statements ‘Saving in a pension would be more attractive if I could access the funds under certain circumstances’ and ‘It’s better to manage your own pension savings’, by demographics, December 2012
                                                                                                                                                  • Figure 73: Agreement with the statements ‘There are better ways to save for retirement than a pension’ and ‘Arranging my own personal pension is not necessary’, by demographics, December 2012
                                                                                                                                                  • Figure 74: Attitudes towards saving in a pension, by value of retirement savings, December 2012

                                                                                                                                              Companies Covered

                                                                                                                                              • Aegon UK
                                                                                                                                              • Aviva Plc
                                                                                                                                              • BUPA
                                                                                                                                              • Friends Provident plc
                                                                                                                                              • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                              • Lloyds Banking Group
                                                                                                                                              • Scottish Widows Investment Partnership Ltd
                                                                                                                                              • Standard Life Assurance Company

                                                                                                                                              Personal and Stakeholder Pensions - UK - March 2013

                                                                                                                                              US $2,583.33 (Excl.Tax)