UK Pensions 2010

Overview 1
Catalyst 1
Summary 1
Executive Summary 2
Both regular and single premium pension markets contracted in 2009 2
Providers should focus on SIPPs 2
Providers will need to assist consumers in every step of retirement planning 2
The RDR aims to increase consumer confidence in seeking pensions advice 2
IFAs are unchallenged in the distribution of pension products 2
Table of Contents 3
Table of figures 4
Table of tables 5
Market Context 6
There are three main products in the pensions market 6
Stakeholder pensions are the most basic form of pension product 6
Personal pensions are aimed at the mass affluent market 7
SIPPs provide consumers with increased control over investments 7
The pressure on state benefits are increasing as the whole pension market is declining 8
Personal pensions and SIPPs still command the single premium pensions market despite a fall in new business premiums 8
Group personal pensions saw an increase in market share during 2009 8
Stakeholder pension market share contracted by 2% in 2009 9
Single premium SIPPs maintained a market share of 23% in 2009 10
Regular premium pension market contacted by 16.7% in 2009 11
Group personal pensions continue to dominate the regular premium market 11
Stakeholder pensions lost market share as new business declined by £103m APE in 2009 12
SIPPs maintain market share despite falls in new business during 2009 12
Providers should focus on SIPPs 12
GPP will decline as the government aims to roll out NESTs in 2012 13
The features offered by SIPPs will spur their growth over 2010-14 14
Additional voluntary contributions and stakeholder pensions will be the biggest losers in the regular premium pensions market 14
SIPPs are forecasted to drive the single premium pensions market for the next five years 15
Distributing SIPPs on an efficient wrap platform will provide investors with increased tax-efficiency and convenience 16
Greater clarity of SIPPs is needed to prevent a mis-selling scandal in the future 17
The increasing interest in SIPPs does not necessarily signal an end for personal and stakeholder pensions 17
Market Issues 19
There are five main areas that are impacting on the pension market 19
Economic climate presents a challenge to the pensions market 19
Accumulators have suffered significant losses from the poor performance of pension funds 19
Pension funds are still at the mercy of volatile stock markets 20
Pension funds have been hit by the Deep Horizon leak as BP halted dividend payments 20
Providers will need to assist consumers in every step of their retirement planning 20
Consumers misunderstand the pensions savings process and fail to recognize the different stages of retirement planning 20
Consumers increasingly feel alone when it comes to retirement planning as the shift from defined benefit to defined contribution continues 21
Consumers are not aware of the range of pension products available to them 21
Employees are being forced to bear more risks in defined contribution schemes 21
Providers need to target aspiring accumulators 22
Providers should target young people as a priority 23
Aspirers demand efficient solutions to personal finances 23
Providers need to make the aging population aware of the risks of not saving now 23
People will be living an additional 4.3 years in retirement by 2031 23
Providers should target consumers who are in the accumulation stage 24
The changing demographics in the UK is putting time pressure on long-term savings planning 25
Providers should seek opportunities where the government fails to help consumers achieve financial security in retirement 26
The state benefit system in its current form is buckling under increasing pressure 26
The government links pensions to earnings in a triple lock guarantee 27
The government has put all its eggs into NESTs but the success of the scheme is questionable 27
NESTs are not as low cost as they was initially suggested 27
NESTs will be in competition with stakeholder pensions and SIPPs 28
The coalition government will make its mark on pensions and NESTs 29
The RDR aims to increase consumer confidence in seeking pensions advice 29
The RDR will address recent failures in the pensions market 29
Consumer confidence will be boosted through interacting with better qualified IFAs 30
Providers will need to clearly distinguish their role as an advisor and a sales person 30
The RDR will decrease the chances of unsuitable advice being given to the pensions market 30
SIPPs are at the forefront of product innovation 31
SIPPs have received the most recent attention 31
Appropriate segmentation and targeting of SIPPs can boost take-up and retention 31
Uninsured SIPP transfer rates increased in 2009 to 83.8% 32
Alternative investments to pension schemes are available for those who wish to diversify their long-term savings portfolio 34
Individual savings accounts are a tax efficient way of boosting savings 34
Venture capital trusts are high-risk and tax efficient 35
Property provides security for investors who seek a long-term investment 35
Competitor Dynamics 36
A successful rebranding campaign has contributed to Aviva taking the top spot in the regular premium market in 2009 36
Aviva nets the highest market share in 2009 36
Lloyds Banking Group overtook Aviva as number one new business provider in the single premium market in 2009 38
The top three players in the regular premium market also top the single premium market in 2009 38
Similar trends were observed across the regular and single premium pension markets in 2009 39
Competitors have increased market share through a variety of means 39
Aviva's change from Norwich Union is a marketing success 40
Lloyds TSB merger with HBOS makes it the top provider of single premium pensions 42
Lloyds Banking Group will face competition criticism in the long term 42
Asset management companies break top 20 in both the regular and single premium markets in 2009 42
Distribution Dynamics 43
IFAs are unchallenged in the distribution of pension products 43
Single tie distributors has become an increasingly popular choice for consumers, with a CAGR of 48.7% over 2005-09 43
IFAs will continue to dominate despite a changing pension landscape 44
Stakeholder pension regular premium distribution splits show that bancassurance suffered in 2009 46
The regular premium stakeholder pensions market will become more evenly distributed between single tied, bancassurance and IFAs over the next five years 47
IFAs will remain dominant in the personal pension regular premium market 48
IFAs will continue to dominate the regular premium personal pensions market over the next five years 49
The regular premium SIPPs market was dominated by IFA new business sales in 2009, despite a declining market 50
Non-intermediated regular premium SIPP sales will fall out of the market, while IFAs increase their distribution market share out to 2014 51
Stakeholder pensions single premium distribution splits 52
The single premium stakeholder pensions market is declining and is not attracting competition between the distribution channels 53
IFAs were the dominant distribution channel in 2009 for single premium personal pensions, with a market share of 80% 54
Bancassurance will see a decline in distribution share with a forecasted CAGR of -16% over 2010-14 55
Single premium SIPPs distribution is predominately controlled by the IFA channel 56
IFAs will continue to dominate the single premium SIPPs market out to 2014 57
Online distribution and wraps will enhance the ease of financial planning 58
Online channels make it easier for providers and advisors to target the mass market 58
Wrap platforms and SIPPs are complementary and are becoming increasingly popular 59
Regulatory changes to distribution provide a particular challenge to the sale of SIPPs 59
Wrap platforms are conducive to consumers' needs when saving for retirement 59
Wrap platforms and SIPPs are complementary with demand for this structure increasing 59
Corporate wrap platforms will become the norm along side retail wrap platforms 60
Wrap platforms accommodate the FSA's move to a transparent pricing structure 60
Implementing the RDR in 2012 could see opportunities arise for bancassurance to increase market share 60
The IFA distribution channel could become consolidated as IFAs choose retirement over retraining 60
Consolidation of IFAs could raise opportunities for bancassurance to increase its share in the distribution of pension products 60
Appendix 61
Supplementary information 61
Definitions 66
Single premium policy 66
Regular premium 66
New business 66
Life-based savings products 66
In-specie contribution 66
Pension product definitions 66
Personal pensions 66
Stakeholder pensions 66
Group personal pensions (GPPs) 66
DSS rebates 67
Employer-sponsored stakeholder pension 67
Self-invested personal pensions (SIPPs) 67
ABI definitions of distribution channels 67
Independent financial advisors (IFAs) 67
Direct sales forces 67
Tied agents 67
Multi-tied agents 67
Bancassurance 68
Direct marketing 68
Other 68
Further reading 68
Ask the analyst 68
Datamonitor consulting 68
Disclaimer 68
List of Tables
Table 1: New business premiums for single premium pensions (£m APE), 2005-09 10
Table 2: SIPPs new business premiums, by use (£m APE), 2005-09 10
Table 3: New business premiums for regular premium pensions (£m APE), 2005-09 12
Table 4: Forecasted new business premiums for regular premium pensions (£m APE), 2010-14 15
Table 5: Forecasted new business premiums for single premium pensions (£m APE), 2010-14 18
Table 6: New business premiums in transferred/non-transferred pension insured and uninsured SIPPs (£m APE), 2008 and 2009 34
Table 7: Top 20 companies in the regular premium pensions market, by new business premiums (£m APE), 2009 37
Table 8: Top 20 companies in the single premium pensions market, by new business premiums (£m APE), 2009 39
Table 9: Total (regular and single pension premiums) new business premiums (£m APE), by channel, 2005-09 44
Table 10: Forecasted total (regular and single pension premiums) new business premiums (£m APE), by channel, 2010-14 46
Table 11: Stakeholder pensions regular premium distribution splits (£m APE), 2005-09 61
Table 12: Forecasted stakeholder pensions regular premium distribution splits (£m APE), 2010-14 61
Table 13: Personal pensions regular premium distribution splits (£m APE), 2005-09 62
Table 14: Forecasted personal pensions regular premium distribution splits (£m APE), 2010-14 62
Table 15: SIPPs regular premium distribution splits (£m APE), 2005-09 62
Table 16: Forecasted SIPPs regular premium distribution splits (£m APE), 2010-14 63
Table 17: Stakeholder pensions single premium distribution splits (£m APE), 2005-09 63
Table 18: Forecasted stakeholder pension single premium distribution splits (£m APE), 2010-14 63
Table 19: Personal pensions single premium distribution splits (£m APE), 2005-09 64
Table 20: Forecasted personal pensions single premium distribution (£m APE), 2010-14 64
Table 21: SIPPs single premium distribution splits (£m APE), 2005-09 64
Table 22: Forecasted SIPPs single premium distribution splits (£m APE), 2010-14 65
List of Figures
Figure 1: The single premium pensions market contracted in 2009 9
Figure 2: Group personal pensions dominate the regular premium pension market 11
Figure 3: GPPs will decline as the government introduce NESTs 13
Figure 4: SIPPs will gain market share over the coming years, demonstrating positive year-on-year growth 16
Figure 5: Pension providers have a certain level of control over certain aspects of market issues 19
Figure 6: The percentage of the population over retirement age is set to increase 24
Figure 7: Fertility rates for the over-35s and over-40s experience an upward trend 25
Figure 8: Transfers were a significant portion of single premium SIPPs new business in 2009 33
Figure 9: Aviva is the top provider of regular premium pensions with a 21.5% market share in 2009 36
Figure 10: Lloyds Banking Group was the top provider of single premium pensions in 2009 38
Figure 11: Norwich Union advertising campaign to enhance its new name of Aviva 40
Figure 12: Emotive advertising engages new and existing consumers 41
Figure 13: IFAs dominate the distribution landscape 43
Figure 14: Distribution channels among providers will remain stable in a flat market 45
Figure 15: Bancassurance fell dramatically in 2009 47
Figure 16: Bancassurance will continue to suffer out to 2014 48
Figure 17: New business through financial advisors fell in 2009 as bancassurance saw a rise 49
Figure 18: IFAs will see a slight recovery in new business premiums from 2011 50
Figure 19: IFAs continue to dominate the SIPPs market despite a year-on-year downward trend in 2008-09 51
Figure 20: Bancassurance will fall out of the SIPPs market, leaving IFAs to continue domination 52
Figure 21: IFAs' market share halved between 2006 and 2009 53
Figure 22: IFAs continue to lose market share in the medium term 54
Figure 23: IFAs' new business premiums declined by -31% in 2009 55
Figure 24: Non-intermediated distribution channels will bottom out of the market in 2013 56
Figure 25: IFAs led the new business premiums in 2009 despite a fall from their 2007 peak 57
Figure 26: Non-intermediated new business premiums will have a CAGR of 24% over 2010-14 58

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