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SIPPs - UK - December 2011

“The SIPP market faces many challenges with legislative and regulatory changes a constant threat to providers. SIPPs have seen impressive growth over the past few years and there is a feeling within the industry that they could become the most popular pension choice for the general public in the future. However, there are many factors working against the industry at present including the external economic environment, the RDR and changes to tax relief. However, if providers can successfully navigate their way through these dangers then the future for SIPPs looks bright.”

– Stephanie Seenan, Financial Services Analyst

Some questions answered in this report include:

  • How will changes to tax relief impact on SIPPs?
  • Can the SIPPs market continue to flourish?
  • What impact will fees have on SIPPs?
  • How big an influence will other factors besides supplier control have?
  • Will flexible drawdown increase SIPP business levels?

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Table of contents

  1. Introduction

      • Abbreviations
        • Definitions
        • Executive Summary

            • The market
              • The SIPPs market can overcome minor bumps in the road
                • Figure 1: SIPPs value forecast, by new premium sales, 2006-16
              • Market factors
                • The pensions market is facing some challenging times
                  • Figure 2: Life expectancy at age 50 and 65, by gender, 1981-2058 (actual and projected)
                • Market share
                  • Figure 3: Top SIPP providers, by value of in-force business, September 2011
                • The consumer
                  • Savings and Investment values
                    • Figure 4: Value of savings and investments, July 2011
                  • Financial advice usage
                    • Figure 5: Financial advice, July 2011
                  • Money management
                    • Figure 6: Money management, July 2011
                  • SIPP recognition is not widespread
                    • Figure 7: SIPP Recognition, July 2011
                  • Pension investment control
                    • Figure 8: Pension investment control, July 2011
                  • Preferences in financial management company attributes
                    • Figure 9: Preferences in financial management company attributes, July 2011
                  • What we think
                  • Issues in the Market

                      • How will changes to tax relief impact on SIPPs?
                        • Can the SIPPs market continue to flourish?
                          • What impact will fees have on SIPPs?
                            • How big an influence will other factors besides supplier control have?
                              • Will flexible drawdown increase SIPP business levels?
                              • Future Opportunities

                                • Turbulent financial times make flexibility an important feature
                                  • Taking the long-term, cautious view could pay dividends when it comes to pensions
                                  • Internal Market Environment

                                    • Key points
                                      • What are the main growth drivers of SIPPs?
                                        • Lower income groups looking to SIPPs
                                          • Global debt crisis impacting on SIPPs funds
                                            • How will the RDR impact on SIPPs?
                                              • FSA Platform Policy Paper – SIPP platform changes
                                                • Low interest rates putting the squeeze on SIPP providers
                                                  • Changing pension landscape
                                                    • Government impact on pension savings
                                                      • Government intervention is the greatest threat to the pensions industry
                                                        • Supplier consolidation could see smaller firms priced out of the market
                                                          • Junior SIPPs
                                                            • Esoteric assets to cause problems for SIPPs providers
                                                              • Flexible drawdown forms around one fifth of the SIPPs market
                                                              • Broader Market Environment

                                                                • Key points
                                                                  • People are living for longer than ever before – disaster for the pensions industry unless the retirement age is increased
                                                                    • Figure 10: Life expectancy at age 50 and 65, by gender, 1981-2058 (actual and projected)
                                                                  • Higher-rate taxpayer numbers growing – this is good news for SIPPs providers
                                                                    • Figure 11: Total number of taxpayers and number on higher rate, 1990/91-2011/12
                                                                  • Women are set to face a retirement on a very tight budget
                                                                    • Frozen salaries and rising cost of living puts a squeeze on savings
                                                                      • The eurozone crisis is doing nothing to help calm investment fears
                                                                        • Stock markets remain turbulent
                                                                          • Figure 12: FTSE 100 and FTSE All Share – daily index movements, September 2001-September 2011
                                                                        • Savers facing a challenging environment
                                                                          • Figure 13: Average annual changes in the Bank of England base rate, CPI and RPI – UK, 2001-10
                                                                        • Pensions deficit
                                                                        • Competitive Context

                                                                          • Key points
                                                                            • SIPPs proving to be the most popular personal pension option
                                                                              • Figure 14: Number of new individual pension contracts, by product type, 2005-10
                                                                            • SIPPs see good growth in the new single premium market
                                                                              • Figure 15: Value of new individual pension business, by product type, 2005-10
                                                                            • SSASs’ competitive position relative to SIPPs diminishing
                                                                              • Figure 16: Value of new EPP and SSAS business, 2005-10
                                                                          • Strengths and Weaknesses in the Market

                                                                              • Figure 17: SWOT Analysis
                                                                          • Who’s Innovating?

                                                                            • Key points
                                                                              • Corporate Wrap from Hargreaves Lansdown alternative to company pensions
                                                                                • Deposit account offering from Leeds Building Society
                                                                                  • Torquil Clark offer ‘TQ Active Money’ service
                                                                                    • Flexible drawdown option from Axa
                                                                                      • Pointon York offers SIPPs compliant with Sharia laws to attract British Muslim investors
                                                                                        • No annual management charge SIPP from JPJShare.com
                                                                                          • LV= partnership with Barclays Stockbrokers allows greater market access
                                                                                            • Phased drawdown from Aviva
                                                                                              • Carbon-neutral SIPP from Pointon York
                                                                                              • Market Size and Forecast

                                                                                                • Key points
                                                                                                  • SIPP market continues to expand
                                                                                                    • Volume of SIPP business on the increase but volume levels fall
                                                                                                      • Figure 18: Volume and value of new SIPP business, 2006-11
                                                                                                    • Mintel forecasts tempered growth in the SIPP market
                                                                                                      • Figure 19: SIPPs value market forecast, by new premium sales, 2006-16
                                                                                                    • Forecast methodology
                                                                                                    • Market Segmentation

                                                                                                      • Key points
                                                                                                        • Non-insured market is seeing the insured sector through a tough year
                                                                                                          • Figure 20: Value and volume of new SIPP business, segmented, by insured and non-insured business, 2008-11
                                                                                                        • Average insured premium levels coming into line with average non-insured
                                                                                                          • Figure 21: Average new premium, segmented, by insured and non-insured business, 2008-11
                                                                                                        • Transfer rates similar in insured and non-insured sectors
                                                                                                          • Figure 22: Value of SIPP transfers and share of total single premiums, 2008-11
                                                                                                      • Market Share

                                                                                                        • Key points
                                                                                                          • Market Ccnsolidation
                                                                                                            • Outsourcing of SIPP administration growing
                                                                                                              • Standard Life retains position as largest SIPP provider
                                                                                                                • Figure 23: Largest 12 SIPP providers, by value of in-force business, 2011 (mid-year)
                                                                                                            • Companies and Products

                                                                                                              • Standard Life
                                                                                                                  • Figure 24: Key financial data for Standard Life UK, H1 2010-H1 2011
                                                                                                                • James Hay Partnership
                                                                                                                    • Figure 25: Key financial data for James Hay Holdings Ltd, 2009-10
                                                                                                                  • AEGON UK
                                                                                                                      • Figure 26: Key financial data for AEGON UK plc, 2009-10
                                                                                                                    • A J Bell
                                                                                                                        • Figure 27: Key financial data for AJ Bell Holdings Ltd, H1 2010-H1 2011
                                                                                                                      • Hargreaves Lansdown
                                                                                                                          • Figure 28: Key financial data for Hargreaves Lansdown plc Group, 2010-11
                                                                                                                        • Suffolk Life
                                                                                                                            • Figure 29: Key financial data for Suffolk Life Pensions, 2009-10
                                                                                                                        • Channels to Market

                                                                                                                          • Key points
                                                                                                                            • Regular premium SIPP sales up in all channels but intermediaries are still top
                                                                                                                                • Figure 30: New regular-premium SIPPs, by sales channel, 2008-10
                                                                                                                              • IFAs sell the majority of new single premium SIPPs
                                                                                                                                • Figure 31: New single-premium SIPPs, by sales channel, 2008-10
                                                                                                                              • Changes to SIPP platforms necessary to see the industry through the RDR
                                                                                                                              • Brand Communication and Promotion

                                                                                                                                • Key points
                                                                                                                                  • Changes in the pensions advertising landscape
                                                                                                                                    • Figure 32: Total advertising expenditure on pensions and retirement income solutions, by sub-category, 2007-11
                                                                                                                                  • Aviva tops the advertising spending charts
                                                                                                                                    • Figure 33: Top ten advertisers of pensions and retirement income solutions, 2009-11
                                                                                                                                  • Internet and press advertising on the increase in 2011
                                                                                                                                    • Figure 34: Proportional distribution of adspend on pensions and retirement income solutions, by media type, 2009-11
                                                                                                                                • Investment and Asset Ownership

                                                                                                                                  • Key points
                                                                                                                                    • 15% of people have at least £50,000 in investible assets
                                                                                                                                      • Figure 35: Value of savings and investments, July 2011
                                                                                                                                    • Some 4% of affluent investors already have a SIPP
                                                                                                                                      • Figure 36: Pension and investment asset ownership among affluent consumers, July 2011
                                                                                                                                    • SIPP ownership highest amongst those with £250,000 or more to invest
                                                                                                                                      • Figure 37: Pension and investment asset ownership among affluent consumers, by value of savings and investments, July 2011
                                                                                                                                  • Financial Advice

                                                                                                                                    • Key points
                                                                                                                                      • High street banks and IFAs are the most popular destinations for those looking for financial advice
                                                                                                                                        • Figure 38: Financial advice, July 2011
                                                                                                                                      • Those with less to invest are more likely to take a DIY approach to financial advice
                                                                                                                                        • Figure 39: Financial advice, by value of savings and investments, July 2011
                                                                                                                                      • Personal decision making the most popular form of money management
                                                                                                                                        • Figure 40: Money management, July 2011
                                                                                                                                    • SIPP Awareness

                                                                                                                                      • Key points
                                                                                                                                        • Less than half of affluent people have heard of SIPPs
                                                                                                                                          • Figure 41: SIPP recognition, July 2011
                                                                                                                                        • SIPP recognition higher among men
                                                                                                                                          • Figure 42: SIPP recognition, by gender, July 2011
                                                                                                                                        • Young people have lower SIPP awareness
                                                                                                                                          • Figure 43: SIPP recognition, by age, July 2011
                                                                                                                                        • ABs have greater SIPP recognition levels than other socio-economic groups
                                                                                                                                          • Figure 44: SIPP recognition, by socio-economic group, July 2011
                                                                                                                                        • SIPP awareness is relatively constant across investible asset value
                                                                                                                                          • Figure 45: SIPP recognition, by value of savings and investments, July 2011
                                                                                                                                        • Those who use the press for advice have the highest level of SIPP awareness
                                                                                                                                          • Figure 46: SIPP recognition, by financial advice, July 2011
                                                                                                                                        • SIPP recognition higher with those who occasionally consult financial advisors
                                                                                                                                          • Figure 47: SIPP recognition, by money management, July 2011
                                                                                                                                      • Pension Investment Control

                                                                                                                                        • Key points
                                                                                                                                          • 24% of respondents feel that they don’t need a lot of control over their pensions
                                                                                                                                            • Figure 48: Taking control of pension investments, July 2011
                                                                                                                                          • Those with more to invest have a greater confidence in picking their own investments
                                                                                                                                            • Figure 49: Taking control of pension investments, by value of savings and investments, July 2011
                                                                                                                                          • Personal and stakeholder pension owners are interested in pension consolidation
                                                                                                                                            • Figure 50: Taking control of pension investments, by most popular asset ownership, July 2011
                                                                                                                                          • Those using press and the internet for financial advice don’t feel the need for a high level of pension control
                                                                                                                                            • Figure 51: Taking control of pension investments, by financial advice, July 2011
                                                                                                                                          • Interest in pension consolidation higher with those who take professional financial advice
                                                                                                                                            • Figure 52: Taking control of pension investments, by money management, July 2011
                                                                                                                                          • SIPP awareness higher amongst those who don’t want that level of control over their pensions
                                                                                                                                            • Figure 53: Taking control of pension investments, by SIPP recognition, July 2011
                                                                                                                                          • Pension investment control by demographics
                                                                                                                                            • Figure 54: Pension investment control, by demographics, July 2011
                                                                                                                                        • Preferences in Company Attributes

                                                                                                                                          • Key points
                                                                                                                                            • Well-informed staff tops the list of preferred finance company attributes
                                                                                                                                              • Figure 55: Financial management company choice, July 2011
                                                                                                                                            • Access to financial advice a key attraction for those with less to invest
                                                                                                                                              • Figure 56: Financial management company choice, by value of savings and investments, July 2011
                                                                                                                                            • Personal and stakeholder pension owners want flexibility and understanding from their financial services provider
                                                                                                                                              • Figure 57: Financial management company choice, by most popular asset ownership, by July 2011
                                                                                                                                            • Respondents who use their bank and IFAs for advice value knowledgeable staff
                                                                                                                                              • Figure 58: Financial management company choice, by financial advice, July 2011
                                                                                                                                            • Occasional users of professional advice want their financial position to be understood
                                                                                                                                              • Figure 59: Financial management company choice, by money management, July 2011
                                                                                                                                            • Respondents with higher levels of SIPP awareness look for accessible named contacts from their financial managers
                                                                                                                                              • Figure 60: Financial management company choice, by SIPP recognition, July 2011
                                                                                                                                          • Appendix – Market Size and Forecast

                                                                                                                                            • SIPP Value
                                                                                                                                              • Figure 61: SIPP market value, by new premiums, 2011-16
                                                                                                                                          • Appendix – Investment and Asset Ownership

                                                                                                                                              • Figure 62: Most popular value of savings and investments, by demographics, July 2011
                                                                                                                                              • Figure 63: Next most popular value of savings and investments, by demographics, July 2011
                                                                                                                                              • Figure 64: Most popular asset ownership, by demographics, July 2011
                                                                                                                                              • Figure 65: Next most popular asset ownership, by demographics, July 2011
                                                                                                                                          • Appendix – Financial Advice

                                                                                                                                              • Figure 66: Financial advice, by demographics, July 2011
                                                                                                                                          • Appendix – SIPP Awareness

                                                                                                                                              • Figure 67: SIPP recognition, July 2011
                                                                                                                                          • Appendix – Pension Investment Control

                                                                                                                                              • Figure 68: Taking control of pension investments, July 2011
                                                                                                                                          • Appendix – Preferences in Company Attributes

                                                                                                                                              • Figure 69: Most popular financial management company choice, July 2011
                                                                                                                                              • Figure 70: Next most popular financial management company choice, July 2011
                                                                                                                                              • Figure 71: Other financial management company choice, July 2011

                                                                                                                                          Companies Covered

                                                                                                                                          • A J Bell Limited
                                                                                                                                          • Aegon Group
                                                                                                                                          • Aviva Plc
                                                                                                                                          • AXA Wealth
                                                                                                                                          • Barclays Bank plc
                                                                                                                                          • Brewin Dolphin Holdings PLC
                                                                                                                                          • City Asset Management
                                                                                                                                          • Cofunds
                                                                                                                                          • Fidelity Investment Services Limited
                                                                                                                                          • Hargreaves Lansdown Plc
                                                                                                                                          • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                          • James Hay Pension Trustees Limited
                                                                                                                                          • Legal & General Group PLC
                                                                                                                                          • Scottish Equitable
                                                                                                                                          • Scottish Widows Investment Partnership Ltd
                                                                                                                                          • Seven Investment Management (7IM)
                                                                                                                                          • Skandia UK
                                                                                                                                          • Standard Life Investments
                                                                                                                                          • Suffolk Life

                                                                                                                                          SIPPs - UK - December 2011

                                                                                                                                          £1,750.00 (Excl.Tax)