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Workplace Pensions - UK - June 2018

“In many respects, the real challenge of auto-enrolment has just begun as increases to minimum contributions help consumers build up more meaningful funds. However, the opt-out rate will almost certainly rise, as hard-up workers find that they cannot afford the higher deductions taken from their salary. Minimising this rise will be key, while also extolling the benefits of voluntarily increasing pension contributions as much as possible.”
- Sam Marks, Financial Services Analyst

This Report looks at the following areas:

  • The need for better education
  • Increased engagement is key to higher contributions

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Table of contents

  1. Overview

    • What you need to know
      • Scope of this Report
        • Trust-based pensions
          • Contract-based pensions
          • Executive Summary

              • The market
                • New premiums fell by 15% in 2017…
                  • Figure 1: Value of new insurer-administered trust-based and group-based pension business* 2013-17
                • …and are expected to continue to decline
                  • Figure 2: Forecast of the value of new insurer-administered trust-based and group-based pension contracts, 2013-23
                • 1.2 million employers have met their auto-enrolment duties
                  • Minimum contribution rises begin
                    • Companies and brands
                      • Top five represent two thirds of the trust-based market
                        • Focus on engagement to improve satisfaction and increase contributions
                          • Fintech challengers focus on technology innovation
                            • The consumer
                              • Three quarters of employees are enrolled in a workplace pension
                                • Figure 3: Workplace pension enrolment, April 2018
                              • 35% say they are in a DC scheme, but many are confused
                                • Figure 4: Type of workplace pension enrolled in, April 2018
                              • 63% support increasing contributions
                                • Figure 5: Attitudes towards workplace pensions, April 2018
                              • Most are satisfied with their workplace pension
                                • Figure 6: Satisfaction with workplace pension, April 2018
                              • Two thirds know exactly what they are contributing
                                • Figure 7: Engagement with workplace pensions, April 2018
                              • What we think
                              • Issues and Insights

                                • The need for better education
                                  • The facts
                                    • The implications
                                      • Increased engagement is key to higher contributions
                                        • The facts
                                          • The implications
                                          • The Market – What You Need to Know

                                            • New premiums fell by 15% in 2017
                                              • Workplace pension ownership continues to rise
                                                • 1.2 million employers have met their auto-enrolment duties
                                                  • Minimum contribution rises begin
                                                  • Market Size and Forecast

                                                    • New contracts recover whilst premiums stall…
                                                      • Figure 8: New insurer-administered trust-based and group-based pension business (volume and value) 2013-17
                                                    • …with further decline expected
                                                      • Figure 9: Forecast of the value of new insurer-administered trust-based and group-based pension contracts, 2013-23
                                                      • Figure 10: Forecast of the value of new insurer-administered trust-based and group-based pension contracts, at current and constant prices, 2013-23
                                                    • Forecast methodology
                                                    • Trends in Workplace Pension Ownership

                                                      • Workplace pension ownership continues to climb
                                                        • Figure 11: Proportion of employees with workplace pensions, 1997-2017
                                                      • Private sector growth confined to contributions below 2% or earnings
                                                        • Figure 12: Percentage of salary personally contributed by employees with workplace pensions, by sector, 2016 and 2017
                                                    • Market Drivers

                                                      • Employer pensions are the most trusted way of saving for retirement…
                                                        • Figure 13: Financial products that consumers consider the safest way to save for retirement, July 2010-June 2012, July 2012-June 2014, July 2014-June 2016 and July 2016-June 2017
                                                      • …but property is seen as the most lucrative option
                                                        • Figure 14: Financial products for saving for retirement that consumers consider make the most money, July 2010-June 2012, July 2012-June 2014, July 2014-June 2016 and July 2016-June 2017
                                                      • House prices continued to rise in 2017, but the market has slowed
                                                        • Figure 15: Average house prices in the UK, by country, January 2005-January 2018
                                                      • 97% of auto-enrolment schemes are defined contribution
                                                        • Figure 16: Pension scheme types and number of auto-enrolled eligible jobholders declared by employers, as at 31 March 2017
                                                      • 1.2 million employers have met their auto-enrolment duties
                                                        • Figure 17: Declarations of compliance, March 2018
                                                    • Regulatory and Legislative Changes

                                                      • Minimum contribution rises begin
                                                        • Figure 18: Minimum employer and staff contributions to be paid to workplace pensions
                                                      • The State Pension has increased
                                                        • Automatic enrolment review 2017
                                                          • A lack of clarity over plans for the Pensions Dashboard
                                                          • Companies and Brands – What You Need to Know

                                                            • Top five represent two thirds of the trust-based market
                                                              • Aviva is the biggest provider of contract-based schemes
                                                                • Focus on engagement to improve satisfaction and increase contributions
                                                                  • Fintech challengers focus on technology innovation
                                                                    • Adspend declined significantly in the last year
                                                                    • Provider Rankings and Market Share

                                                                      • Top five represent two thirds of the trust-based market
                                                                        • Figure 19: Rankings of top 20 providers of insurance-administered trust-based occupational pension business, by gross premiums, 2016
                                                                      • Aviva maintains its prime position
                                                                        • Figure 20: Rankings of top 20 providers of insurance-administered individual and group contract-based pension business, by gross premiums, 2016
                                                                    • Competitive Strategies

                                                                      • Regulation hampers innovation
                                                                        • Focus on engagement to improve satisfaction and increase contributions
                                                                          • Fintech challengers focus on technology innovation
                                                                            • Consolidation in the market
                                                                            • Advertising and Marketing Activity

                                                                              • Adspend declined significantly in the last year
                                                                                • Figure 21: Total above-the-line, online display and direct mail advertising expenditure on pension products and advice, 2015/16-2017/18
                                                                              • TV attracts over a third of total spend
                                                                                • Figure 22: Distribution of above-the-line, online display and direct mail advertising expenditure on pension products and advice, by media type, April 2017-March 2018
                                                                              • GOV UK becomes highest spender
                                                                                • Figure 23: Top 15 above-the-line, online display and direct mail advertisers of pension products and advice, 2016/17-2017/18
                                                                              • Nielsen Ad Intel coverage
                                                                              • The Consumer – What You Need to Know

                                                                                • Private sector workers comprise 73% of the workforce
                                                                                  • Three quarters of employees are enrolled in a workplace pension
                                                                                    • 35% say they are in a DC scheme, but many are confused
                                                                                      • 63% support increasing contributions
                                                                                        • Most are satisfied with their workplace pension
                                                                                          • Two thirds know exactly what they are contributing
                                                                                          • Size and Sector of Employer

                                                                                            • Private sector workers comprise 73% of the workforce
                                                                                              • Figure 24: Size and sector of employer worked for, April 2018
                                                                                            • Public sector workers are feeling the squeeze
                                                                                              • Figure 25: Changes in financial situation, by type of employer, April 2018
                                                                                          • Pension Enrolment

                                                                                            • Three quarters of employees are enrolled in a workplace pension
                                                                                              • Figure 26: Workplace pension enrolment, April 2018
                                                                                            • Public sector workers still more likely to be enrolled in a pension
                                                                                              • Figure 27: Consumers enrolled in a workplace pension, by type of employer, April 2018
                                                                                            • Short-term concerns, long-term repercussions?
                                                                                              • Figure 28: Consumers who have opted out of a workplace pension, by financial confidence, April 2018
                                                                                          • Type of Workplace Pension

                                                                                            • Growth in DC schemes masked by rising confusion
                                                                                              • Figure 29: Type of workplace pension enrolled in, April 2017 vs April 2018
                                                                                            • More help is needed to educate certain groups
                                                                                              • Figure 30: Type of workplace pension enrolled in, by gender and gross household income, April 2018
                                                                                            • Final-salary schemes in decline
                                                                                              • Figure 31: Type of workplace pension enrolled in, by type of employer, April 2018
                                                                                          • Attitudes towards Workplace Pensions

                                                                                            • 63% support increasing contributions…
                                                                                                • Figure 32: Attitudes towards workplace pensions, April 2018
                                                                                              • …but many could face tough choices in the coming years
                                                                                                  • Figure 33: Agreement with selected attitudes towards workplace pensions, by type of workplace pension held, April 2018
                                                                                                • More than half worry about a their standard of living in retirement
                                                                                                  • It’s never too soon to prioritise pensions
                                                                                                    • Figure 34: Agreement with selected attitudes towards workplace pensions, by generation, April 2018
                                                                                                • Satisfaction of Workplace Pension

                                                                                                  • Most are satisfied with their workplace pension…
                                                                                                    • Figure 35: Satisfaction with workplace pension, by age, April 2018
                                                                                                  • …but DC scheme members aren’t as happy
                                                                                                    • Figure 36: Satisfaction with workplace pension, by type of workplace pension held, April 2018
                                                                                                • Engagement with Workplace Pensions

                                                                                                  • Two thirds know exactly what they are contributing
                                                                                                    • Figure 37: Engagement with Workplace Pensions, April 2018
                                                                                                  • 42% regularly check the value of their pensions…
                                                                                                    • …but vulnerable savers are less engaged
                                                                                                      • Figure 38: Agreement with the statement “I regularly check the value of my pension”, by current financial situation, April 2018
                                                                                                    • The case for advice needs to be made more convincingly
                                                                                                    • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                        • Abbreviations
                                                                                                          • Consumer research methodology
                                                                                                          • Appendix – Market Size and Forecast

                                                                                                              • Figure 39: Best- and worst-case forecast of the value of new workplace pension contracts, 2018-23
                                                                                                            • Forecast methodology

                                                                                                            Workplace Pensions - UK - June 2018

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