TABLE OF CONTENTS
Overview 1
Catalyst 1
Summary 1
Executive Summary 3
There are two main products available in the at-retirement market 3
The at-retirement market fell in 2009 after remaining flat in 2008 3
Consumers are not prioritizing retirement planning, despite fears that they will not be able to secure a good retirement income 3
Consumers are unaware of the at-retirement products available, and many do not understand their key features 3
Annuity costs are rising as longevity increases 3
IFAs remain the dominant distribution channel for both annuities and income drawdown 3
Market Context 9
Pension annuities are the leading retirement product 9
The at-retirement market contracted in 2009 after remaining reasonably flat in 2008 11
Datamonitor forecasts the at-retirement market to produce slight growth between 2010 and 2014 13
Market Issues 16
Consumers are not prioritizing retirement planning, despite fears that they will not be able to secure a good retirement income 16
Consumers are unaware of the at-retirement products available and have apathy for understanding key features 19
Consumers can reap the rewards of shopping round and using OMOs to purchase at-retirement products 21
The emergency budget proposed key changes that will give consumers greater flexibility and enhance the at-retirement market 22
The introduction of NESTs will see an increase in the number of at-retirement consumers with pension pots 23
The increase in longevity is proving costly for annuity providers 25
Phased retirement will be a popular option to combat the new financial pressures facing the generation entering the at-retirement market 27
Competitor Dynamics 30
Prudential sold the most new business in annuities during 2009 30
Standard Life held 41.2% of the income drawdown market in 2009 34
Providers should help consumers move toward diversified alternatives 35
Distribution Dynamics 38
IFAs suffered at the hands of the non-intermediated channel over 2005–09 38
IFAs continued to dominate the income drawdown market in 2009 38
Bancassurers will benefit from the implementation of the RDR, while IFAs will continue to seek new business 39
Consumers will increasingly seek out independent financial advice when contemplating retirement options 41
Post 2010, the RDR will impact on the level of advice sought by consumers 43
Appendix 44
Supporting tables 44
Definitions 47
Further reading 49
Ask the analyst 49
Datamonitor consulting 49
Disclaimer 50
TABLE OF FIGURES
Figure 1: Annuities can be grouped into four main groups 9
Figure 2: With annuitization still compulsory, income drawdown remains overshadowed 12
Figure 3: Annuities will continue to dominate the retirement market over 2010–14 14
Figure 4: One-third of people who do not pay into a pension feel that they cannot afford to contribute 16
Figure 5: 35–54 years olds are most concerned about their ability to retire comfortably 17
Figure 6: Only 38.8% of 35–49 year olds hold a pension product, despite rising concerns over securing a good pension income 18
Figure 7: Aviva aims to highlight to consumers their future financial responsibility 19
Figure 8: 89.9% of consumers on £75,000 or more believe that they should be given more options when they enter the at-retirement market 20
Figure 9: Trustworthiness is the most important attribute of a provider 21
Figure 10: Only 32% of consumers purchased their annuity through OMOs in 2009 22
Figure 11: NESTs will introduce an opt-out scheme, with a total contribution of 8% of a employee's salary being saved into a pension fund 24
Figure 12: Men are closing the differential between the sexes' retirement life expectancy at age 65 26
Figure 13: The mean age of women giving birth has increased over the last three decades 28
Figure 14: Phased retirement is going to become an increasingly popular retirement plan 29
Figure 15: Prudential dominated the annuities market in 2009 30
Figure 17: Prudential provide a holistic online service to help consumers make an informed choice 31
Figure 18: Prudential offers a clear range of retirement products 32
Figure 18: AXA has rolled out a flexible annuity in UK, having already proved popular in the US and Japanese markets 33
Figure 19: Standard Life dominated the income drawdown market in 2009 34
Figure 20: Aviva offers different types of equity release 36
Figure 21: The non-intermediated channel gained market share over 2005–09 38
Figure 22: IFAs still heavily dominate the distribution of income drawdown 39
Figure 23: IFAs and bancassurers will increase their market share over 2010–14 40
Figure 24: IFAs will increase their market share of the income drawdown market over 2010–14 42
TABLE OF TABLES
Table 1: New business premiums APE (£m), 2005–09 12
Table 2: Annuities and income drawdown forecast, by new business premiums APE (£m) 15
Table 3: Annuity rates, by gender 27
Table 4: Annuities distribution forecast, by new business premiums APE (£m) 41
Table 5: Income drawdown distribution forecast, by new business premiums APE (£m) 43
Table 6: Consumer concerns over having enough money to retire comfortably, by age 44
Table 7: Top 20 annuities providers, by new business premiums APE (£m) 45
Table 8: Top 10 income drawdown providers, by APE (£m) 46
Table 9: Annuities distribution splits, by new business premiums APE (£m) 46
Table 10: Income drawdown distribution splits, by new business premiums APE (£m) 47
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