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Personal Pensions - UK - April 2016

“The pension freedoms brought renewed interest to the personal pensions market in 2015. However, the pace of legislative and regulatory change is undermining confidence in pension savings, with consumers looking towards alternative investments to fund retirement. As such, pension providers should continue to focus on improving access to education and advice in order to help consumers realise the benefits of saving in a pension.”
– Jessica Galletley, Financial Services Analyst

This report discusses the following key topics:

  • Reliance on familial advice offers a route to pension conversations
  • Workplace pensions scheme moves responsibility for saving enough away from consumers
  • Affordability will still inhibit take-up of robo-advice

The full impact of the new rules is yet to be seen, with the prospect of further change continuing to pose a challenge for the future of the personal pensions market. The announcement of the new Lifetime ISA and speculation about further change to pension tax relief could also limit demand going forward. In addition, providers face widespread disengagement among consumers about saving for the long term and confusion about pensions and benefits of saving in one.

This Report explores the regulatory environment for the personal pensions market, including analysis on the potential threats and opportunities facing the market. It presents Mintel’s exclusive consumer research, which explores the attitudes of both those with and without personal pensions. It analyses the ongoing challenges consumers face in saving towards retirement, and presents recommendations for how providers and advisers can encourage consumers to become more active in considering their retirement income plans.

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Table of contents

  1. Overview

    • What you need to know
      • Products covered in this Report
        • Personal pensions
          • Individual stakeholder pensions
            • Products not covered in this Report
            • Executive Summary

                • The market
                  • Regular premiums grew by 20% in 2015
                    • Figure 1: New personal pension and individual stakeholder pension business, 2011-15
                  • But regulatory change inhibits personal pension contributions
                    • Personal pensions compete with ISAs…
                      • …and SIPPs grow in popularity
                        • Majority of personal pensions sold via independent advisers
                          • Companies and brands
                            • Lloyds Banking Group retains biggest market share
                              • Figure 2: Ranking of individual pension providers – UK, by GWP relating to total individual pension business*, 2013 and 2014
                            • Investment in digital
                              • Scrapping early exit fees
                                • The consumer
                                  • 15% of non-retirees have a personal pension
                                    • Figure 3: Pension product ownership, December 2015
                                  • Affordability is the biggest barrier to personal pension savings
                                    • Figure 4: Barriers to owning or contributing to a personal pension, December 2015
                                  • Nearly a fifth of personal pension holders prefer to save or invest elsewhere
                                    • Figure 5: Attitudes towards personal pensions and saving for retirement, December 2015
                                  • Online information most commonly used source
                                    • Figure 6: Expected sources of information about personal pensions, December 2015
                                  • Changing pension rules is undermining saving for retirement
                                    • Figure 7: Attitudes towards pensions and saving for retirement, December 2015
                                  • What we think
                                  • Issues and Insights

                                    • Reliance on familial advice offers a route to pension conversations
                                      • The facts
                                        • The implications
                                          • Workplace pensions scheme moves responsibility for saving enough away from consumers
                                            • The facts
                                              • The implications
                                                • Affordability will still inhibit take-up of robo-advice
                                                  • The facts
                                                    • The implications
                                                    • The Market – What You Need to Know

                                                      • Regular personal pension premiums increase by 20%
                                                        • Pension freedoms reverse downward trend in premium contributions
                                                          • Lifetime ISA will provide competition to personal pensions
                                                            • SIPP volumes grow
                                                              • Majority of personal pensions sold via independent advisers
                                                              • Market Size and Forecast

                                                                • Significant increase in regular and premium business
                                                                  • Figure 8: New personal pension and individual stakeholder pension business, 2011-15
                                                                • Over two thirds of new business are transfers
                                                                  • Figure 9: Transfers as a share of new personal and individual stakeholder business, 2011-15
                                                                • Market forecast
                                                                  • Figure 10: Forecast for new regular personal pension and individual stakeholder pension premiums, 2015-20
                                                                  • Figure 11: Forecast for new regular personal pension and individual stakeholder pension premiums, 2015-20
                                                                • Forecast methodology
                                                                • Market Drivers

                                                                  • Auto-enrolment brings focus to pensions…
                                                                    • …but pensions compete with ISAs for contributions
                                                                      • Spenders rather than savers
                                                                        • Earnings growth increases ability to save
                                                                          • Figure 12: Consumer price index and average weekly earnings growth, 2011-16
                                                                        • SIPPs appeal to a wider audience
                                                                        • Regulatory and Legislative Developments

                                                                          • Pension freedoms reverse downward trend
                                                                            • New Lifetime ISA will compete with personal pensions…
                                                                              • …but many would be better off continuing to save in a pension
                                                                                • Pension tax relief reform on hold – for now
                                                                                  • Financial Advice Market Review
                                                                                    • Making advice more affordable
                                                                                      • Improving communications with consumers
                                                                                        • Early exit charge limits
                                                                                          • Wider regulatory changes on the horizon
                                                                                          • Channels to Market

                                                                                            • Regulation has affected the availability of advice…
                                                                                              • …but the FAMR outlines plans to tackle the issue
                                                                                                • Majority of personal pensions sold via independent advisers
                                                                                                  • Figure 13: New personal pension business, by sales channel, 2014-15
                                                                                                  • Figure 14: New individual stakeholder pension business, by sales channel, 2014-15
                                                                                              • Key Players – What You Need to Know

                                                                                                • Lloyds retains biggest market share
                                                                                                  • Investing in digital services
                                                                                                    • Scrapping exit fees
                                                                                                      • Adspend increases dramatically due to government activity
                                                                                                      • Market Share

                                                                                                        • Top five represent two thirds of all pension business
                                                                                                          • Lloyds Banking Group maintains top position
                                                                                                            • Consolidation yet to be reflected in the rankings
                                                                                                              • Figure 15: Ranking of individual pension providers – UK, by GWP relating to total individual pension business*, 2013 and 2014
                                                                                                          • Competitive Strategies

                                                                                                              • Investment in digital
                                                                                                                • Robo-advice platforms
                                                                                                                  • At-retirement advice
                                                                                                                    • Scrapping early exit fees
                                                                                                                      • Minimum contribution amounts
                                                                                                                        • Figure 16: Minimum contribution amounts, for selected providers, March 2016
                                                                                                                      • Busy period for mergers and acquisitions
                                                                                                                        • Aviva buys Friends Life
                                                                                                                          • L&G sells Suffolk Life
                                                                                                                            • Swiss RE buys Guardian Financial Services
                                                                                                                              • Old Mutual splitting business into four areas
                                                                                                                              • Advertising and Marketing Activity

                                                                                                                                • Overall pension adspend nearly doubles in 2015…
                                                                                                                                  • Figure 17: Total above-the line, online display and direct mail advertising expenditure on pensions, 2011-15
                                                                                                                                • …but personal pension adspend remains a small proportion of overall total
                                                                                                                                  • Figure 18: Total advertising expenditure on pension and retirement income products, by sub-category, 2011-15
                                                                                                                                • DWP tops list of advertisers
                                                                                                                                  • Figure 19: Top 10 advertisers of pension products (excluding retirement income products), 2013-15
                                                                                                                                • Nielsen Media Research coverage
                                                                                                                                • The Consumer – What You Need to Know

                                                                                                                                  • 57% of non-retirees own a pension
                                                                                                                                    • Affordability inhibits personal pension ownership
                                                                                                                                      • Over-45s prefer a conservative approach to pensions
                                                                                                                                        • Younger consumers prefer informal sources of information
                                                                                                                                          • Pensions seen as difficult to understand
                                                                                                                                          • Pension Ownership

                                                                                                                                            • 57% of non-retirees own a pension…
                                                                                                                                              • …but two in five have no pension savings
                                                                                                                                                • Personal pension ownership is falling
                                                                                                                                                  • Interest in SIPPs is rising
                                                                                                                                                    • Figure 20: Pension product ownership, December 2015
                                                                                                                                                  • Self-employed are more likely to own a personal pension
                                                                                                                                                    • Figure 21: Pension product ownership, by employment type, December 2015
                                                                                                                                                  • Traditional gender roles affect personal pension ownership
                                                                                                                                                    • 59% of personal pension holders are regular contributors
                                                                                                                                                      • Figure 22: Regular contribution to personal pension, December 2015
                                                                                                                                                  • Barriers to Personal Pension Ownership

                                                                                                                                                    • Workplace pensions biggest barrier to personal pension contributions
                                                                                                                                                      • Self-employed are less likely to be able to afford to save
                                                                                                                                                        • More people seeing the benefits of property development
                                                                                                                                                          • Millennials need access to education on pensions
                                                                                                                                                            • Figure 23: Barriers to personal pension ownership, December 2015
                                                                                                                                                          • 18-24s are more likely to be in a position to save
                                                                                                                                                            • Figure 24: Age, by financial situation, December 2015
                                                                                                                                                          • Personal pension contributions inhibited by lack of earnings
                                                                                                                                                            • Figure 25: Agreement with the statement ‘I don’t earn enough to contribute to a personal pension’, by pension ownership, December 2015
                                                                                                                                                        • Attitudes of Personal Pension Holders

                                                                                                                                                          • Personal pension holders prefer a conservative approach
                                                                                                                                                            • Figure 26: Attitudes towards personal pensions and saving for retirement, December 2015
                                                                                                                                                          • Nearly a fifth prefer to save or invest elsewhere
                                                                                                                                                            • A fifth are interested in managing their own investments
                                                                                                                                                              • Figure 27: Attitudes towards personal pensions and saving for retirement, December 2015
                                                                                                                                                          • Expected Sources of Information for Personal Pensions

                                                                                                                                                            • Online sources and IFAs rank highly
                                                                                                                                                              • Figure 28: Expected source of information for personal pensions, December 2015
                                                                                                                                                            • Wealthier households value the advice given by IFAs
                                                                                                                                                              • Figure 29: Expected source of information for personal pensions, by household income, December 2015
                                                                                                                                                            • Younger people prefer more informal advice
                                                                                                                                                              • Figure 30: Expected use of family and friends as a source of information, by age, December 2015
                                                                                                                                                            • Partner with employers to offer professional advice
                                                                                                                                                              • Using one source of information is enough
                                                                                                                                                                • Figure 31: Expected source of information for personal pensions – Repertoire – December 2015
                                                                                                                                                            • Attitudes towards Pensions and Saving for Retirement

                                                                                                                                                              • Confusion around pensions needs to be addressed
                                                                                                                                                                • Education and tracking tools could boost engagement
                                                                                                                                                                  • Frequent changes disrupt retirement planning
                                                                                                                                                                    • Figure 32: Attitudes towards pensions and saving for retirement, December 2015
                                                                                                                                                                  • Online offers an alternative to professional F2F advice
                                                                                                                                                                    • Figure 33: Expected source of information for personal pensions, by agreement with the statement ‘It is worth paying for professional advice about pensions’, December 2015
                                                                                                                                                                  • Parents see the worth in professional advice
                                                                                                                                                                    • Figure 34: Attitudes to pensions and saving for retirement – CHAID – Tree output, December 2015
                                                                                                                                                                • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                                                    • Abbreviations
                                                                                                                                                                      • Consumer research methodology
                                                                                                                                                                        • CHAID Methodology
                                                                                                                                                                        • Appendix – Market Size and Forecast

                                                                                                                                                                          • Market forecast
                                                                                                                                                                            • Figure 35: Forecast for new regular personal pension and individual stakeholder pension premiums, 2015-20
                                                                                                                                                                          • Forecast methodology

                                                                                                                                                                          Companies Covered

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                                                                                                                                                                          Personal Pensions - UK - April 2016

                                                                                                                                                                          £1,995.00 (Excl.Tax)