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UK Retirement Planning market report

“Too many people have a negative view of retirement, with many expecting their generation’s retirement to be less comfortable than both those who came before and those to follow. However, increases to minimum auto-enrolment contributions are likely to show many that they could afford to save more, hopefully prompting above-mandated voluntary increases to savings.”
– Rich Shepherd, Senior Financial Services Analyst

This Report discusses the following key topics:

  • Consumers need a push to improve pension saving habits
  • A more positive message is necessary to boost engagement
  • Online advice is the future, but Baby Boomers need to be shown it is the present too

Every stage of the retirement planning journey has experienced some sort of regulatory or legislative upheaval in the last few years. The introduction of the auto-enrolment scheme has provided millions of workers with a workplace pension for the first time, while providers of retirement advice have had to adapt to the Retail Distribution Review and, now, the FAMR (Financial Advice Market Review). Once people reach retirement, they face a greater choice of retirement income products as a result of pension freedoms.

All these changes, and the challenges and opportunities produced by them, put consumers more in charge of their own financial future, but also more at risk of making poor decisions, than ever before. As a result, it could be argued that effective retirement planning has never been as important as it is now.

This Report looks at how people plan for retirement. The Report examines the retirement planning environment, including macro social factors, regulatory and legislative developments, and innovations and launches in the retirement advice industry. Mintel’s exclusive consumer research looks at the type of savings and investment products people own, which ones they expect to use to fund their retirement, and how much people contribute to workplace pensions. The research examines consumers’ preferred channels for accessing different types of advice and guidance, and how people plan to save and invest after they have retired. Finally, the report looks at consumer attitudes towards retirement planning and retirement in general, such as how much of a priority saving for retirement is at the moment, and when people expect to retire.

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Table of contents

  1. Overview

    • What you need to know
    • Executive Summary

        • The market
          • The length of the average retirement is growing
            • Figure 1: Expectation of life for those aged 65 in each year, period principal projection, UK, 1981-2064
          • Auto-enrolment has boosted workplace pension ownership
            • Figure 2: Proportion of employees with workplace pensions, by pension type, 1997-2016
          • The consumer
            • Almost two thirds have at least one pension product
              • Figure 3: Pension product ownership, October 2017
            • More than half have financial products other than pensions for retirement
              • Figure 4: Other savings and investment products held for retirement, by age, October 2017
            • Friends and family top the list of most likely sources
              • Figure 5: Most likely advice and guidance sources, October 2017
            • A quarter expect to increase contributions as they age
              • Figure 6: Outlook for retirement savings contributions, October 2017
            • Less than a third expect their standard of living to decline in retirement
              • Figure 7: Outlook for standard of living in retirement, October 2017
            • Non-retirees show frustration at moving state pension goalposts
              • Figure 8: Attitudes towards retirement and retirement planning, October 2017
            • What we think
            • Issues and Insights

              • Working later in life is becoming an accepted norm, particularly for women
                • The facts
                  • The implications
                    • Relying on friends and family in retirement may undermine other planning
                      • The facts
                        • The implications
                        • The Market – What You Need to Know

                          • The length of the average retirement is growing
                            • Auto-enrolment has boosted workplace pension ownership
                              • FCA and the government focus on improving support
                              • Retirement Planning Environment

                                • The length of the average retirement is growing
                                  • Figure 9: Expectation of life for those aged 65 in each year, period principal projection, UK, 1981-2064
                                • Longer life expectancy means a greater dependence on state support
                                  • Figure 10: UK population, by age band, and dependency ratios, 2016-86 (based on 2016 projections)
                                • The rate of increase in the state pension age has been accelerated
                                  • Figure 11: Projected dates for full transitions to increase state pension ages, by gender
                              • Retirement Funding Options

                                • Auto-enrolment has boosted workplace pension ownership
                                  • Figure 12: Proportion of employees with workplace pensions, by pension type, 1997-2016
                                • Millennials to bear the brunt of the drop-off in DB schemes
                                  • Figure 13: Proportion of employees with workplace pensions by age band and type of pension, 2016
                                  • Figure 14: Proportion of employee jobs with workplace pensions, by type of pension, 2016
                                • Fewer personal pensions are being arranged
                                  • Figure 15: Number of new individual personal and stakeholder pensions, 2011-16
                                • Lifetime ISA reframes ISAs as retirement savings vehicles
                                    • Figure 16: Number of ISAs and amounts subscribed, segmented by component type, 2010/11-2016/17
                                  • Annuity sales have been outpaced by income drawdown
                                    • Figure 17: Volume of new annuity and income drawdown sales, 2012-16
                                  • One in ten people aged 65+ are still working
                                    • Figure 18: Employment rate among people aged 65+, Q1 2010-Q3 2017
                                  • Buy-to-let regulation could discourage retirement planning linked to property
                                    • Figure 19: New buy-to-let mortgages, by purpose of loan, not seasonally adjusted, 2011-16*
                                • Regulatory and Legislative Changes

                                  • Pensions Dashboard prototype goes live
                                    • Three advisory firms due to merge into one
                                      • New rules mean annuity providers must encourage shopping around
                                      • The Consumer – What You Need to Know

                                        • Almost two thirds have at least one pension product
                                          • More than half have financial products other than pensions for retirement
                                            • Friends and family top the list of most likely sources of information
                                              • A quarter expect to increase contributions as they age
                                                • Less than a third expect their standard of living to decline in retirement
                                                  • Non-retirees show frustration at moving state pension goalposts
                                                  • Pension Product Ownership

                                                    • Almost two thirds have at least one pension product
                                                        • Figure 20: Pension product ownership, October 2017
                                                      • Younger Millennials lag behind on workplace pension ownership
                                                        • Figure 21: Pension product ownership, by generation, October 2017
                                                      • Pension ownership falls among lower earners
                                                          • Figure 22: Pension product ownership, by gross annual household income, October 2017
                                                      • Other Products and Plans for Retirement

                                                        • More than half plan to use non-pension savings and investments to fund retirement
                                                          • Figure 23: Other savings and investment products held for retirement, October 2017
                                                        • 25-34s are at risk of poor returns on cash savings
                                                          • Figure 24: Other savings and investment products held for retirement, by age, October 2017
                                                        • A third of non-retired people plan to fund retirement through an earned income…
                                                            • Figure 25: Other retirement funding plans, October 2017
                                                          • … rising to 46% of non-retired females aged 55+
                                                              • Figure 26: Other retirement funding plans, by age and gender, October 2017
                                                            • Half of non-retired people focus on 1-3 alternative products and plans
                                                              • Figure 27: Number of other savings/investment products and retirement funding plans, combined repertoire, October 2017
                                                          • Most Likely Advice and Guidance Sources

                                                            • Friends and family top the list of most likely sources
                                                                • Figure 28: Most likely advice and guidance sources, October 2017
                                                              • Personal pension holders more likely to take formal advice
                                                                • Figure 29: Most likely advice and guidance sources, by pension product ownership, October 2017
                                                              • Younger people recognise they will need support
                                                                  • Figure 30: Use of any advice source, October 2017
                                                              • Outlook for Retirement Savings Contributions

                                                                • A quarter expect to increase contributions as they age
                                                                  • Figure 31: Outlook for retirement savings contributions, October 2017
                                                                • Good intentions to increase contributions weaken as people age
                                                                  • Figure 32: Outlook for retirement savings contributions, October 2017
                                                                • People with alternative retirement funding plans are still more likely to say savings will increase
                                                                  • Figure 33: Outlook for retirement savings contributions, by other retirement funding plans, October 2017
                                                              • Outlook for Standard of Living in Retirement

                                                                • Less than a third expect their standard of living to decline in retirement
                                                                  • Figure 34: Outlook for standard of living in retirement, by outlook for retirement savings contributions, October 2017
                                                                • Younger people are more optimistic about an improvement in their standard of living
                                                                  • Figure 35: Outlook for standard of living in retirement, October 2017
                                                              • Attitudes towards Retirement and Retirement Planning

                                                                • Non-retirees show frustration at moving state pension goalposts
                                                                  • Figure 36: Attitudes towards retirement and retirement planning, October 2017
                                                                • Scammers are undermining confidence in retirement planning
                                                                  • Just a quarter have made plans for future care needs
                                                                    • People are facing up to the reality of a ‘working retirement’
                                                                        • Figure 37: Agreement with the statement ‘I don’t think I will ever fully retire’, October 2016 / October 2017
                                                                      • Older people less keen on later life entrepreneurship scheme
                                                                        • Figure 38: Agreement with the statement ‘It would be a good idea to let people take money from their pension to set up a new business in later life’, by age, October 2017
                                                                    • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                        • Abbreviations
                                                                          • Consumer research methodology