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Self Invested Personal Pensions - SIPPs - UK - December 2009

This report presents an overview of the key issues facing the SIPP industry. As well as examining the wider economic, demographic and regulatory environment, the report details the value of new business and takes a look at the competitive landscape.

  • Although providers are doing much to open up the SIPPs market, it remains a high-end product. Costs may have come down but they remain higher than many mass-market alternatives.
  • Even for the retired there is a role for SIPPs to play. More flexible rules regarding income generation mean that a SIPP can be a useful tool in retirement, even if this is a relatively niche role, best suited for the very top end of the market.
  • While under-represented in the target wealth market, those with comparatively low household incomes still make up a significant proportion of those who could have enough assets to be worth consolidating them in a SIPP.
  • Consumer research indicates there is a sizeable potential market for low cost online SIPPs: two-thirds of those with at least £50,000 in investible assets are daily internet users, and a further 13% use the internetcdez at least weekly.
  • Just one in 20 with investible assets of £50,000 or more report that they are actively considering buying a SIPP. Given that around 6% of the affluent population already own a SIPP, the 5% who are currently strongly considering investing in the product still represents a major opportunity to significantly increase the pool of customers.
  • The prospect of rising interest rates and taxes will make the tax benefits of saving in a SIPP increasingly attractive.
  • Increased regulatory requirements from the FSA, while difficultly and costly to implement, will give SIPP providers an opportunity to enhance their reputations.

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Table of contents

  1. Issues in the Market

      • Key issues
        • Abbreviations
        • Future Opportunities

          • Looking on the bright side of increased regulation
            • Turning buy-to-let property into a SIPP
              • Rising taxes and inflation will make SIPPs more attractive
                • SIPPs are not just for high earners
                  • Technological advances could lead to more direct SIPP sales
                  • Market in Brief

                    • Two consecutive years of decline
                      • Figure 1: New APE* individual pension premiums, by product type, 2004-09
                    • Demographic and economic influences
                      • Internal market environment
                        • Nearly all new business is intermediated
                          • Top four SIPP providers account for 60% of the value of in-force business
                            • Figure 2: SIPP market share, by value of in-force business, September 2009
                          • Personal pension adspend up in 2009
                            • Key consumer research findings
                              • Asset and product ownership
                                • Attitudes towards SIPPs
                                • Internal Market Environment

                                  • Key points
                                    • The virtual extinction of final-salary pension schemes
                                      • SIPPs a possible replacement for high-end DB schemes
                                        • Convoluted SIPP charging structure needs streamlining
                                          • Some providers employing contentious business practices
                                            • Regulatory and legislative environment
                                              • Protected rights funds now transferable to any type of SIPP
                                                • Intermediaries will be key in raising awareness
                                                  • RDR pushing independent advice further upmarket
                                                    • Treating Customers Fairly initiative
                                                      • FSA criticism of pension switching leads to decline in transfer business
                                                        • The FSA's investigation into small SIPP providers
                                                          • Increased regulatory burden likely to lead to consolidation
                                                            • MW Pensions fraud case puts smaller providers in an awkward position
                                                              • Tax relief on pensions for high earners more restrictive from April 2011
                                                                • Concerns about government meddling
                                                                • Broader Market Environment

                                                                  • Key points
                                                                    • Key target market for SIPPs is very narrow…
                                                                      • Figure 3: Size and segmentation of the target wealth market based on investible assets*, October 2009
                                                                    • …but there is still plenty of room for expansion
                                                                      • Increasing longevity puts greater pressure on retirement income
                                                                        • Figure 4: Cohort life expectancy at age 60, by gender, 1981-2056
                                                                      • SIPPs well placed to provide advanced retirement income solutions
                                                                        • UK economic recovery will be slow and drawn out
                                                                          • Stockmarket performance has improved but many still nursing losses
                                                                            • Figure 5: FTSE 100 and FTSE All Share – daily index movements, November 2003-November 2009
                                                                          • Rising taxes and inflation will encourage many into tax wrappers
                                                                            • Figure 6: Monthly changes in the rate of annual inflation* and Bank of England base rate – UK, October 2005-October 2009
                                                                        • Competitive Context

                                                                          • Key points
                                                                            • Workplace pensions the direct competitors
                                                                              • The decline in traditional occupational pension provision
                                                                                • GPPs and company stakeholder pensions
                                                                                  • The National Pension Savings Scheme
                                                                                    • Non-pension alternatives
                                                                                      • ISAs
                                                                                        • Investment bonds
                                                                                          • Buy-to-let property
                                                                                          • Strengths and Weaknesses in the Market

                                                                                              • Figure 7: SIPP – SWOT analysis, 2009
                                                                                          • Who’s Innovating?

                                                                                            • Key points
                                                                                              • More providers introducing Family SIPPs
                                                                                                • AXA Winterthur Family Suntrust SIPP
                                                                                                  • Curtis Banks Flexible Family Trust
                                                                                                    • IPS Partnership Family SIPP
                                                                                                      • EU SIPP from London & Colonial
                                                                                                        • Dentons launches ‘Single Portfolio’ SIPP
                                                                                                          • RDR-ready SIPP from Stadia Trustees
                                                                                                          • Trade Perspective

                                                                                                              • Recession has not had a negative impact on SIPP market
                                                                                                                • Key SIPP clientele
                                                                                                                  • Impact of RDR
                                                                                                                    • Impact of MW Pensions fraud scandal
                                                                                                                      • Key issues affecting the market
                                                                                                                        • Scope for innovation
                                                                                                                        • Market Size and Forecast

                                                                                                                          • Key points
                                                                                                                            • New individual pension business continues to fall in 2009
                                                                                                                              • Figure 8: New individual pension premiums, by product type, 2004-09
                                                                                                                            • Slowdown in transfer business key factor behind decline
                                                                                                                              • Figure 9: Single-premium transfer business, 2006-09
                                                                                                                            • Over half a million SIPP policies in force at year-end 2008
                                                                                                                              • Figure 10: Total number of policies and regular premiums from individual pensions business in force, by pension type, 2004-08
                                                                                                                            • Forecast
                                                                                                                              • Return to growth in 2010
                                                                                                                                • Figure 11: Forecast of new SIPP APE* premiums, 2004-14
                                                                                                                              • Factors used in the forecast
                                                                                                                              • Market Share

                                                                                                                                • Key points
                                                                                                                                  • Market share is difficult to determine
                                                                                                                                    • Top four providers account for 60% SIPP market share
                                                                                                                                      • Figure 12: SIPP market share, by value of in-force business, September 2009
                                                                                                                                    • Aegon dominates insured SIPPs market share
                                                                                                                                      • Figure 13: Insured SIPPs market shares, September 2009
                                                                                                                                    • Fully self-invested SIPP market share
                                                                                                                                      • Figure 14: Fully self-invested SIPP market shares, September 2009
                                                                                                                                  • Companies and Products

                                                                                                                                    • Major players
                                                                                                                                      • Aegon Scottish Equitable
                                                                                                                                        • AJ Bell
                                                                                                                                          • Hargreaves Lansdown
                                                                                                                                            • James Hay
                                                                                                                                              • Standard Life
                                                                                                                                                • Suffolk Life
                                                                                                                                                • Brand Communication and Promotion

                                                                                                                                                  • Key points
                                                                                                                                                    • Pension-related adspend down by a quarter in 2009
                                                                                                                                                      • Figure 15: Pensions advertising expenditure, by sub-category, year to October 2007-09
                                                                                                                                                    • Top ten pension advertisers account for 70% of total adspend
                                                                                                                                                      • Figure 16: Advertising expenditure by the top ten pensions advertisers, years to October 2008 and 2009
                                                                                                                                                    • Majority of advertising done through specialist publications
                                                                                                                                                      • Figure 17: Overview of media type used to advertise pensions-related products, year to October 2009
                                                                                                                                                  • Channels to Market

                                                                                                                                                    • Key points
                                                                                                                                                      • Most new personal pension business driven by IFAs
                                                                                                                                                        • IFAs responsible for 89% of new SIPP business in 2009
                                                                                                                                                          • Figure 18: Proportional distribution of new APE* premiums into SIPPs, by distribution channel, 2004-09
                                                                                                                                                        • Technological advances could eventually lead to more direct sales
                                                                                                                                                        • The Consumer – Asset and Product Ownership

                                                                                                                                                          • Key points
                                                                                                                                                            • Asset ownership
                                                                                                                                                              • Still a high-end product
                                                                                                                                                                  • Figure 19: Asset ownership, October 2009
                                                                                                                                                                • Male, middle-aged and professional
                                                                                                                                                                    • Figure 20: Profile of SIPP target groups, by gender, age, socio-economic group, detailed lifestage, lifestage and marital status, October 2009
                                                                                                                                                                  • Income, or assets?
                                                                                                                                                                      • Figure 21: Profile of SIPP target groups, by working status, gross annual household income and region, October 2009
                                                                                                                                                                    • The potential for online SIPPs
                                                                                                                                                                        • Figure 22: Profile of SIPP target groups, by internet usage frequency, web use and newspaper readership, October 2009
                                                                                                                                                                      • Product ownership
                                                                                                                                                                        • An above-average range of investments held
                                                                                                                                                                            • Figure 23: Amount of different types of investible assets held, by level of investible assets, October 2009
                                                                                                                                                                          • SIPPs are niche, even among the well off
                                                                                                                                                                              • Figure 24: Pension ownership, by level of investible assets, October 2009
                                                                                                                                                                            • Property moving people up the wealth ladder...
                                                                                                                                                                              • …but will they really still want to be landlords in retirement?
                                                                                                                                                                                • SIPPs’ appeal spans the age groups
                                                                                                                                                                                    • Figure 25: Asset ownership, by gender and age, October 2009
                                                                                                                                                                                  • The concentration on high earners
                                                                                                                                                                                      • Figure 26: Asset ownership, by socio-economic group and gross annual household income, October 2009
                                                                                                                                                                                  • The Consumer – Attitudes Towards SIPPs

                                                                                                                                                                                    • Key points
                                                                                                                                                                                      • Relatively high degree of product recognition…
                                                                                                                                                                                          • Figure 27: Statements on SIPPs and taking control over pension investments, October 2009
                                                                                                                                                                                        • …but sales may have to come through IFAs
                                                                                                                                                                                          • Good news – or bad?
                                                                                                                                                                                            • Appeal among the affluent…
                                                                                                                                                                                                • Figure 28: Statements on SIPPs and taking control over pension investments, by value of investible assets, October 2009
                                                                                                                                                                                              • …but a strange lack of interest among those who might benefit from consolidation
                                                                                                                                                                                                  • Figure 29: Statements on SIPPs and taking control over pension investments, by form of investible assets, October 2009
                                                                                                                                                                                                • Mixed signals across all age groups
                                                                                                                                                                                                    • Figure 30: Statements on SIPPs and taking control over pension investments, by gender and age, October 2009
                                                                                                                                                                                                  • ABs and the willingness to take control
                                                                                                                                                                                                      • Figure 31: Statements on SIPPs and taking control over pension investments, by socio-economic group and lifestage, October 2009
                                                                                                                                                                                                    • Higher earners taking advantage of the tax breaks
                                                                                                                                                                                                        • Figure 32: Statements on SIPPs and taking control over pension investments, by household income and online activities, October 2009
                                                                                                                                                                                                    • The Consumer – Advice and Targeting Opportunities

                                                                                                                                                                                                      • Key points
                                                                                                                                                                                                        • High street banks are still a key channel
                                                                                                                                                                                                            • Figure 33: Sources used for financial or investment advice, by total value of investible assets, October 2009
                                                                                                                                                                                                          • Some scope for high street sales…
                                                                                                                                                                                                              • Figure 34: Statements on SIPPs and taking control over pension investments, by key advice channels, October 2009
                                                                                                                                                                                                            • …but IFAs remain the most promising sales channel
                                                                                                                                                                                                            • Appendix – The Consumer – Asset Ownership

                                                                                                                                                                                                                • Figure 35: Asset ownership, by total value of investible assets, October 2009
                                                                                                                                                                                                            • Appendix – Market Background and Definitions

                                                                                                                                                                                                              • What can be held in SIPPs and how the product has evolved
                                                                                                                                                                                                                • SIPP types
                                                                                                                                                                                                                  • Other definitions
                                                                                                                                                                                                                    • A-day changes aimed to encourage greater pension participation
                                                                                                                                                                                                                      • SIPP market fully regulated since April 2007

                                                                                                                                                                                                                      Companies Covered

                                                                                                                                                                                                                      • A J Bell Limited
                                                                                                                                                                                                                      • Abbey
                                                                                                                                                                                                                      • Aegon Group
                                                                                                                                                                                                                      • Alliance Trust Savings Ltd
                                                                                                                                                                                                                      • Association of British Insurers
                                                                                                                                                                                                                      • Association of Consulting Actuaries
                                                                                                                                                                                                                      • Aviva Plc
                                                                                                                                                                                                                      • AWD Wealth Management
                                                                                                                                                                                                                      • AXA UK plc
                                                                                                                                                                                                                      • Bank of England
                                                                                                                                                                                                                      • Barclays Bank plc
                                                                                                                                                                                                                      • BNP Paribas
                                                                                                                                                                                                                      • BT Group plc
                                                                                                                                                                                                                      • Burns Anderson Independent Network PLC
                                                                                                                                                                                                                      • Cadbury Trebor Bassett
                                                                                                                                                                                                                      • Cater Allen Ltd
                                                                                                                                                                                                                      • ComPeer Limited
                                                                                                                                                                                                                      • Diageo UK
                                                                                                                                                                                                                      • Dunfermline Building Society
                                                                                                                                                                                                                      • Fidelity Investment Services Limited
                                                                                                                                                                                                                      • Financial Services Authority (The)
                                                                                                                                                                                                                      • Friends Provident plc
                                                                                                                                                                                                                      • Government Actuary's Department (GAD)
                                                                                                                                                                                                                      • Grupo Santander Central Hispano S.A.
                                                                                                                                                                                                                      • Hargreaves Lansdown Plc
                                                                                                                                                                                                                      • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                                                                                                      • Hornbuckle Mitchell Trustees Limited
                                                                                                                                                                                                                      • HSBC Private Bank (UK) Limited
                                                                                                                                                                                                                      • James Hay Pension Trustees Limited
                                                                                                                                                                                                                      • Legal & General Assurance Society Limited
                                                                                                                                                                                                                      • Legal & General Group PLC
                                                                                                                                                                                                                      • Lighthouse Group Plc
                                                                                                                                                                                                                      • London Stock Exchange plc
                                                                                                                                                                                                                      • LV=
                                                                                                                                                                                                                      • Market & Opinion Research International (MORI)
                                                                                                                                                                                                                      • MetLife Investors Insurance
                                                                                                                                                                                                                      • Newton Investment Management Limited
                                                                                                                                                                                                                      • Norwich Union
                                                                                                                                                                                                                      • Office for National Statistics
                                                                                                                                                                                                                      • Pointon York SIPP Solutions
                                                                                                                                                                                                                      • Principality Building Society
                                                                                                                                                                                                                      • Prudential plc
                                                                                                                                                                                                                      • Quilter & Co Ltd
                                                                                                                                                                                                                      • Royal Albert Hall
                                                                                                                                                                                                                      • Scottish Equitable
                                                                                                                                                                                                                      • Scottish Life
                                                                                                                                                                                                                      • Scottish Widows Bank plc
                                                                                                                                                                                                                      • St James' Place Plc
                                                                                                                                                                                                                      • Standard Life Assurance Company
                                                                                                                                                                                                                      • Suffolk Life
                                                                                                                                                                                                                      • Tenet Group Ltd
                                                                                                                                                                                                                      • UBS Wealth Management UK Ltd
                                                                                                                                                                                                                      • Winterthur Life UK Limited
                                                                                                                                                                                                                      • Zurich Financial Services

                                                                                                                                                                                                                      Self Invested Personal Pensions - SIPPs - UK - December 2009

                                                                                                                                                                                                                      £1,995.00 (Excl.Tax)