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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
          • More pensioners, more pressure on the state pension
            • Figure 1: Expectation of life, principal projection, UK, 1981-2062
          • Auto-enrolment continues to increase workplace pension ownership
            • Figure 2: Pension provisions of UK workers, by type of pension, 2010-15
          • The consumer
            • Pension ownership rises but savings and investments stay largely stable
              • Figure 3: Savings and pension product ownership, October 2016
              • Figure 4: Investment product ownership, October 2016
            • Savings accounts and ISAs expected to play a large role in retirement
              • Figure 5: Products expected to be used to fund retirement, October, 2016
            • Most workplace pension contributors are paying in the minimum amount
              • Figure 6: Current workplace pension contribution levels, October 2016
            • Face-to-face is the preferred channel for professional advice
              • Figure 7: Interest in different channels for receiving retirement advice and guidance, by types of advice and guidance, October 2016
            • Two fifths plan to save and invest in the same manner after retiring
              • Figure 8: Post-retirement saving and investing plans, October 2016
            • Funding retirement is a concern for many but a priority for few
              • Figure 9: Attitudes towards retirement planning, October 2016
            • There is little optimism surrounding retirement
              • Figure 10: Attitudes towards retirement, October 2016
            • What we think
            • Issues and Insights

              • Consumers need a push to improve pension saving habits
                • The facts
                  • The implications
                    • A more positive message is necessary to boost engagement
                      • The facts
                        • The implications
                          • Online advice is the future, but Baby Boomers need to be shown it is the present too
                            • The facts
                              • The implications
                              • The Market – What You Need to Know

                                • More pensioners, more pressure on the state pension
                                  • Auto-enrolment continues to increase workplace pension ownership
                                    • The retirement advice market faces more regulatory changes
                                      • Online planning tools target Millennials and Baby Boomers alike
                                      • Retirement Planning Environment

                                        • Longer life expectancies put greater importance on retirement decisions
                                          • Figure 11: Expectation of life, principal projection, UK, 1981-2062
                                        • More pensioners, a greater burden on the state
                                          • Figure 12: UK population, by age band, and dependency ratios, 2014-84 (based on 2014 projections)
                                        • The new state pension took effect in 2016
                                          • Figure 13: Projected dates for full transitions to increase state pension ages, by gender
                                      • Retirement Funding Options

                                        • DC membership continues to grow due to auto-enrolment…
                                          • Figure 14: Pension provisions of UK workers, by type of pension, 2010-15
                                        • …and attention now turns to increasing contributions
                                          • Figure 15: Auto-enrolment minimum contribution timetable
                                        • Personal pensions membership slides as a result of auto-enrolment
                                          • Figure 16: Number of personal pension schemes, excluding SIPPs, in force, 2010-15
                                        • Lifetime ISAs set to launch as an alternative to pensions
                                          • Figure 17: Number of ISAs and amounts subscribed, segmented by component type, 2011/12-2015/16
                                        • Income drawdown has overtaken annuities
                                          • Figure 18: Volume and value of new annuities and income drawdown contracts, 2013-16
                                        • Buy-to-let market hit by regulatory changes
                                          • Figure 19: Number of mortgages for buy-to-let, monthly, November 2013-October 2016
                                      • Regulatory and Legislative Changes

                                        • FAMR looks to make advice more affordable and accessible…
                                          • …but official guidance services are about to change
                                            • Advice allowance: enough to increase take-up?
                                              • Encouraging competition in annuities
                                                • The Government closes pension ‘recycling’ tax loophole
                                                • Recent Market Developments

                                                  • Aviva targets Millennials with Shape My Future service…
                                                    • …and has returned to the advice market
                                                      • Saga launches planning tool for over-50s
                                                        • Employer-based advice and guidance enters the market
                                                        • The Consumer – What You Need to Know

                                                          • Pension ownership rises but savings and investments stay largely stable
                                                            • Savings accounts and ISAs expected to play a large role in retirement
                                                              • Most workplace pension contributors are paying in the minimum amount
                                                                • Face-to-face is the preferred channel for professional advice
                                                                  • Funding retirement is a concern for many but a priority for few
                                                                    • There is little optimism surrounding retirement
                                                                    • Savings and Investment Product Ownership

                                                                      • Workplace pension ownership rises to 36%
                                                                        • Figure 20: Savings and investments product ownership, October 2015 vs October 2016
                                                                      • Savings and investments ownership stay largely stable
                                                                        • Pension inequalities persist
                                                                        • Retirement Funding Plans

                                                                          • Not all pension holders expect their pension to fund retirement
                                                                            • Figure 21: Products expected to be used to fund retirement, October, 2016
                                                                          • Popularity of Cash ISAs could point to a bright future for Lifetime ISAs
                                                                            • A third plan to fund their retirement with just one product
                                                                              • Figure 22: Repertoire of products expected to be used to fund retirement, October 2016
                                                                          • Workplace Pension Contribution Activity

                                                                            • Most workplace pension contributors are paying in the minimum amount
                                                                                • Figure 23: Current workplace pension contribution levels, October 2016
                                                                              • A third of DC pension holders voluntarily pay above the required amount
                                                                                • Women’s contributions lag behind men
                                                                                  • Figure 24: Current workplace pension contribution levels, by gender, October 2016
                                                                              • Advice and Guidance Channels

                                                                                • Face-to-face is the preferred channel for professional advice…
                                                                                  • Figure 25: Interest in different channels for receiving retirement advice and guidance, by types of advice and guidance, October 2016
                                                                                • …but online channels are more popular for guidance services
                                                                                  • Baby Boomers are resistant to online channels services
                                                                                      • Figure 26: Interest in using online methods to access professional retirement advice and guidance services, by generation, October 2016
                                                                                  • Post-retirement Saving and Investing Plans

                                                                                    • Two fifths plan to save and invest in the same manner after retiring
                                                                                      • Figure 27: Post-retirement saving and investing plans, October 2016
                                                                                    • People are aware of the length of retirement
                                                                                      • Wealthier savers and investors are more likely to have a post-retirement plan
                                                                                        • Figure 28: Post-retirement saving and investing plans, October 2016
                                                                                    • Attitudes towards Retirement Planning

                                                                                      • Funding retirement is a major concern…
                                                                                          • Figure 29: Attitudes towards retirement planning, October 2016
                                                                                        • …but a relatively low priority
                                                                                          • Figure 30: Current workplace pension contribution levels, by agreement with the statement “Planning for retirement is a priority for me at the moment”, October 2016
                                                                                        • Education about retirement options is essential
                                                                                        • Attitudes towards Retirement

                                                                                          • Is retirement becoming a thing of the past?
                                                                                              • Figure 31: Attitudes towards retirement, October 2016
                                                                                            • Generation X are the most pessimistic about retirement
                                                                                                • Figure 32: Agreement with the statements “I think my generation will not have as comfortable a retirement as previous ones”, and “I think my generation will have a more comfortable retirement than future ones”, by generation, October 2016
                                                                                              • The state pension age: no longer the default marker of retirement
                                                                                                • Figure 33: Agreement with the statement “I plan to retire as soon as I can claim the state pension”, by agreement with the statement “I expect to have a comfortable income in retirement”, October 2016
                                                                                            • Appendix – Data Sources, Abbreviations, and Supporting Information

                                                                                                • Abbreviations
                                                                                                  • Consumer research methodology

                                                                                                  Companies Covered

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