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Retirement Planning - UK - January 2016

“It is too early to judge whether pension freedoms has had a generally positive or negative impact on consumers. However, there is no doubt as to the scale of the impact they have already had on the retirement industry. Product providers and advisors are developing new offerings, while regulators are watching closely for warning signs.”
– Deborah Osguthorpe, Head of UK Financial Services Research

This report examines the following areas:

  • Rise of the robo-advisers
  • Are people making the most of increased choice?
  • More awareness, less understanding?

The retirement industry has been in a state of vast and rapid change since the pension freedoms reforms were announced in April 2014. Since they took effect in April 2015, consumers have faced a much greater level of choice about how to fund their retirement. The most obvious result seen in the industry has been the near-collapse of the annuities market as consumers have deferred making retirement decisions or taken advantage of the other options newly open to them.

Other areas of financial services have been affected too. In particular, financial advisers have been prompted to develop more accessible services in order to serve a generation of retirees who may have never used advice but suddenly find themselves in need of it. Elsewhere in the advice sector, high street banks have been tempted to return with retirement-specific propositions, having all-but-deserted advice in the wake of the Retail Distribution Review (RDR).

This report examines how people plan for retirement. The retirement planning environment is examined, including the main products used by consumers to save for retirement, as well as those that provide a retirement income. The report also discusses recent developments in advice and guidance. Mintel’s exclusive consumer research looks at consumers’ saving and investment holdings, the use and expected use of different sources of financial advice and guidance, and interest in various channels for receiving these services. Understanding of the retirement income options is examined, as well as consumer attitudes towards retirement planning, such as whether people pay enough attention to retirement and how confident they are about their retirement prospects.

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Table of contents

  1. Overview

    • What you need to know
    • Executive Summary

        • The retirement planning environment
          • An ageing population will increase the burden on the state…
            • Figure 1: Actual and projected life expectancies at 65, by gender, 1981-2062
          • …so more responsibility is being put onto the individual
            • Figure 2: Pension provisions of UK workers, by type of pension, 2005-14
          • Pension freedoms have prompted a surge in income drawdown
            • The consumer
              • 40% have a pension
                • Figure 3: Savings and investment product ownership, October 2015
              • Existing pension providers are heavily favoured over others
                • Figure 4: Non-retired pension holders’ actual and expected use of sources of retirement planning advice/guidance, October 2015
              • Retirees favoured expert advice
                • Figure 5: Retirees’ actual and expected use of sources of retirement planning advice/guidance, October 2015
              • Face-to-face advice is the top choice but online has potential
                • Figure 6: Interest in using different channels of advice/guidance for retirement planning, October 2015
              • Employment and property are key to supplementing income
                • Figure 7: Non-pension incomes expected to be received in retirement, October 2015
              • Better understanding of retirement options is needed
                • Figure 8: Understanding of the pension freedoms reforms, October 2015
                • Figure 9: Confidence in finding information about retirement options, October 2015
              • People are aware of the need to save, but don’t expect to do enough
                • Figure 10: Attitudes towards retirement planning, October 2015
              • What we think
              • Issues and Insights

                • Rise of the robo-advisers
                  • The facts
                    • The implications
                      • Are people making the most of increased choice?
                        • The facts
                          • The implications
                            • More awareness, less understanding?
                              • The facts
                                • The implications
                                • The Market – What You Need to Know

                                  • An ageing population will increase the burden on the state…
                                    • …so more responsibility is being put onto the individual
                                      • Pension freedoms have prompted a surge in income drawdown
                                        • New and old solutions for the advice gap problem
                                        • Retirement Planning Environment

                                          • Longer lives, longer retirements
                                            • Figure 11: Actual and projected life expectancies at 65, by gender, 1981-2062
                                          • An older, more dependent population
                                            • Figure 12: Percentage of UK population, by age band, and dependency ratios, 2014-64 (based on 2014 projections
                                          • Women’s state pension age to rise to 63 in March 2016
                                              • Figure 13: Projected dates for full transitions to increase state pension ages, by gender as of 2015
                                          • Retirement Funding Options

                                            • Auto-enrolment is driving a surge in DC membership…
                                              • Figure 14: Pension provisions of UK workers, by type of pension, 2005-14
                                            • …while membership of personal pension schemes is falling
                                              • Figure 15: Number of personal pension schemes in force, 2009-14
                                            • 60% rise in ISA deposits
                                              • Figure 16: Number of ISAs and amounts subscribed, segmented by component type, 2008-09/2014/15
                                            • Surge in income drawdown as annuities sales plummet
                                              • Figure 17: Volume and value of new annuities and income drawdown contracts, 2010-15
                                            • The role of property
                                            • Retirement Planning Advice Summary

                                              • Pension Wise problems
                                                • Advice returns to the high street?
                                                  • Online services seek to plug the advice gap
                                                  • The Consumer – What You Need to Know

                                                    • 38% of non-retirees have a pension
                                                      • Existing pension providers are heavily favoured over others
                                                        • Retirees favour expert advice
                                                          • Face-to-face advice is the top choice but online has potential
                                                            • Employment and property are key to supplementing income
                                                              • Better understanding of retirement options is needed
                                                                • People are aware of the need to save, but don’t expect to do enough
                                                                • Savings and Investment Product Ownership

                                                                  • 40% of internet users have a pension
                                                                    • Figure 18: Savings and investment product ownership, October 2015
                                                                  • ISAs offer an alternative to pensions
                                                                    • Work to be done to improve youth engagement…
                                                                      • Figure 19: Pension ownership, by age, October 2015
                                                                    • …while gender inequality still exists
                                                                      • Figure 20: Pension ownership, by gender, October 2015
                                                                  • Non-retirees’ Use of Sources of Advice/Guidance

                                                                    • Existing pension providers have a big advantage
                                                                        • Figure 21: Non-retired pension holders’ actual and expected use of sources of retirement planning advice/guidance, October 2015
                                                                      • Importance of guidance from family and friends is holding back Pension Wise
                                                                        • Non-pension holders have a healthy appetite for future advice
                                                                          • Figure 22: Non-retired non-pension holders’ actual and expected use of sources of retirement planning advice/guidance, October 2015
                                                                        • Investors are more likely to take advice
                                                                          • Figure 23: Non-retirees’ actual and expected use of sources of retirement planning advice/guidance, by investment ownership, October 2015
                                                                      • Retirees’ Use of Sources of Advice/Guidance

                                                                        • Expert advice was retirees’ top choice when planning for retirement…
                                                                          • Figure 24: Retirees’ actual and expected use of sources of retirement planning advice/guidance, October 2015
                                                                        • …but very few plan to take further advice or guidance
                                                                          • Are employers taking a more active role in retirement planning?
                                                                          • Interest in Advice/Guidance Channels

                                                                            • Familiarity of face-to-face advice is unmatched by alternatives…
                                                                                • Figure 25: Interest in using different channels of advice/guidance for retirement planning, October 2015
                                                                              • …but interest in online services points to large growth potential
                                                                              • Alternative Retirement Incomes

                                                                                • A third plan to work beyond the state pension age
                                                                                    • Figure 26: Non-pension incomes expected to be received in retirement, October 2015
                                                                                  • 29% of homeowners plan to draw an income from their property
                                                                                    • Figure 27: Selected homeowners’ non-pension incomes expected to be received in retirement, October 2015
                                                                                  • Inheritance is relied upon by many but estates are being squeezed
                                                                                    • Pension holders have a clearer idea of additional income streams
                                                                                      • Figure 28: Non-pension incomes expected to be received in retirement, by pension ownership, October 2015
                                                                                  • Understanding of Pension Freedoms Reforms

                                                                                    • The clear need for guidance and advice…
                                                                                        • Figure 29: Understanding of the pension freedoms reforms, October 2015
                                                                                      • …and better promotion of services
                                                                                        • Figure 30: Confidence in finding information about retirement options, October 2015
                                                                                      • Pension holders have better understanding of their options
                                                                                        • Figure 31: Understanding of the pension freedoms reforms, by pension ownership, October 2015
                                                                                    • Attitudes towards Retirement Planning

                                                                                      • Just 18% are confident of having a comfortable retirement
                                                                                        • Figure 32: Attitudes towards retirement planning, October 2015
                                                                                      • A third think too many people leave it too late to plan for retirement
                                                                                        • 14% expect to be paying a mortgage or rent in retirement
                                                                                          • Pension holders are more likely to be confused by retirement options
                                                                                            • Figure 33: Agreement with selected attitudes towards retirement planning, by pension ownership, October 2015
                                                                                        • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                            • Abbreviations
                                                                                              • Consumer research methodology

                                                                                              Companies Covered

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                                                                                              Retirement Planning - UK - January 2016

                                                                                              US $2,672.70 (Excl.Tax)