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Pensions - Intermediary Focus - UK - January 2014

Published By :

Mintel

Published Date : Feb 2014

Category :

Banking

No. of Pages : 93 Pages

Many companies offer their employees the opportunity to enrol in some form of pension scheme, but relatively few back this up with the supply of financial advice or education. The closer ties advisers are developing with employers due to pension auto-enrolment provide a significant opportunity to work with companies to develop employer-based advice services.
Table of Content

Introduction

Abbreviations

Executive Summary

The market
Adviser numbers have started to rebound post-RDR
Figure 1: Adviser numbers, 31 December 2012 and 10 January 2014
Adviser share of individual pension business
Adviser share of workplace pension business
Adviser share of retirement income business
Market factors
First FCA thematic review uncovers RDR growing pains
Nearly all advisers have met the new qualification standards
Auto-enrolment boosting demand for pension advice
Workplace pension charge cap proposed
Companies, brands and innovation
Advice market dominated by large adviser firms
Technology helping advisers to take advantage of emerging opportunities
The adviser
Most advisers still run an independent business model
Figure 2: Current adviser business model, November 2013
Low priority given to retirement savings seen as the key challenge
Figure 3: Top seven challenges facing pension intermediaries, November 2013
Most IFAs expect to grow or maintain new pension business in 2014
Figure 4: New pensions business expectations for the coming year, November 2012 vs. November 2013
RDR continues to be a thorn in the side of advisers
Figure 5: Perceived impact of regulatory and other market developments on own business over the next 12 months, in order of positive influence, November 2013
Advisers unsure if auto-enrolment will lead to more demand for advice
Figure 6: Perceived long-term impact of auto-enrolment on intermediaries, November 2013
What we think

Issues and Insights

Will advisers be able to hang on to the independent label?
The facts
The implications
The less obvious long-term opportunity of auto-enrolment for advisers
The facts
The implications
Is mass-market annuity business worth chasing?
The facts
The implications

Trend Application

Web-based advisory services helping advisers reach the mass market
Overcoming the auto-enrolment capacity crunch
The ageing population creates a windfall for pension advisers

Regulatory Context

Key points
The effect of the RDR
Summary of RDR changes
Figure 7: Summary of the key requirements for the retail investment market, pre- and post- RDR, January 2014
FCA thematic review uncovers early RDR implementation growing pains
FCA further elaborates on the distinction between independent and restricted advice
Adoption of the restricted adviser model could rise over next few years
FCA cites room for improvement in the disclosure of adviser charging
Only a minority of advisers have not yet obtained full qualifications
Figure 8: Number of advisers as of 31 July 2013
New capital adequacy rules have been deferred until December 2017
DWP has proposed a cap on workplace pension charges

Market Drivers

Key points
Ageing population pushing up demand for retirement planning advice
Figure 9: UK population, by age, 2010-35 (2010-based projections)
Auto-enrolment increasing the need for workplace pension advice…
But individual pension business prospects have been damaged
DIY financial management becoming more commonplace
More than a quarter say they prefer to receive advice via their PC
Figure 10: Preferred channels for financial advice, May 2013
Less than a fifth of companies offer financial advice to their staff
Figure 11: Proportion of employers offering benefits to all employees, 2009 and 2013
Low annuity rates make retirement income advice more vital than ever…
but most annuity sales are non-advised

Who’s Innovating?

Key points
Technology being developed help firms meet auto-enrolment obligations
SimplyBiz introduces SimplyEnrol to help smooth the auto-enrolment advice process
Good to go’ from Standard Life assists advisers with auto-enrolment for SMEs
Littleblue’ the pension and auto-enrolment solution for SMEs from Lorica
Monibox.co.uk aims to fill the mass-market advice gap
Penguin Wealth to launch free web-based pension advice service

Adviser Market Size

Key points
A post-RDR rebound in adviser numbers
Figure 12: Adviser numbers, estimated 2012 and actual December 2012, July 2013 and January 2014
Adviser numbers could rise further
Retail investment adviser numbers fell by a fifth between 2010 and 2012
Figure 13: Size of the retail investment adviser (RIA) population, by firm type, 2010-12
Decline in the number of directly authorised firms halted in 2012

Adviser Share of Individual Pension Business

Key points
New adviser model categories now in effect
Individual pension regular premiums
Three quarters of regular premiums sold with advice
Figure 14: Share of new individual pensions (regular premiums), by distribution channel, by volume and value, 2013 (est)*
Figure 15: Total value of new individual pension business – regular premiums, by distribution channel, 2013
Over half of individual stakeholder pensions sold direct or via restricted advice
Figure 16: Total new individual pension business – by value of regular premiums, sales channel breakdown, 2013 (est)*
Individual pension single premiums
Independent advisers generated more than £10 billion in new single-premium sales in 2013
Figure 17: Total new individual pensions – single premiums, by sales channel, by volume and value, 2013 (est)*
Figure 18: Total value of new individual pension business – single premiums, by distribution channel, 2013
Independent advisers dominate single-premium SIPP and personal pension business
Figure 19: Total new individual pension business – by value of single premiums, sales channel breakdown, 2013 (est)*

Adviser Share of Workplace Pension Business

Key points
Advisers central to the distribution of workplace pensions
Trust-based occupational pension schemes
Regular premiums
Just over half of all new regular-premium business was non-advised in 2013
Figure 20: Total new trust-based pensions business – regular premiums, by sales channel, by volume and value, 2013 (est)*
Figure 21: Total value of new trust-based pension business – regular premiums, by distribution channel, 2013
82% of TIPs sales were non-advised in 2013
Figure 22: Total new trust-based pension business – by value of regular premiums, sales channel breakdown, 2013 (est)*
Single premiums
Advisers hold a slight edge over the non-advised channel
Figure 23: Total new trust-based pensions – single premiums, by sales channel, by volume and value, 2013 (est)*
Figure 24: Total new trust-based pension business – single premiums, by distribution channel, 2013
Large majority of new DB and DC single premiums sold via non-advised channels
Figure 25: Total new trust-based pension business – by value of single premiums, sales channel breakdown, 2013 (est)*
Contract-based GPP and company stakeholder schemes
Regular premiums
£3.3 billion of total £3.9 billion in regular premiums generated by independent advisers
Figure 26: Share of new contract-based workplace pension business (regular premiums), by distribution channel, by volume and value, 2013 (est)*
Figure 27: Total value of new contract-based workplace pension business – regular premiums, by distribution channel, 2013
Two in five company stakeholder regular premiums sold direct or via restricted advice
Figure 28: Total new contract-based workplace pension business – by value of regular premiums, sales channel breakdown, 2013 (est)*
Single premiums
Large majority of single-premium business sold via independent advisers
Figure 29: Total new contract-based workplace pension business – by value of single premiums, by sales channel, by volume and value, 2013 (est)*
Figure 30: Total value of new contract-based workplace pension business – single premiums, by distribution channel, 2013

Adviser Share of Retirement Income Business

Key points
Annuities
More than half of annuity sales were non-advised in 2013
Figure 31: Total new annuity premiums, by sales channel, by volume and value, 2013 (est)*
Figure 32: Total value of new annuity pension business, by distribution channel, 2013
Income drawdown
Nine in 10 income drawdown sales are via an independent adviser
Figure 33: Total new drawdown premiums, by sales channel, by volume and value, 2013 (est)*
Figure 34: Total value of new drawdown premiums, by distribution channel, 2013

Adviser Firm Rankings

Key points
Large advisory firms dominate the market
Figure 35: Top 20 financial adviser firms in the UK based on gross sales, 1 October 2012-30 September 2013
Most pension and retirement income business goes via adviser networks
RDR continues to drive consolidation activity
Note on Matrix Solutions data

Companies and Products

Sesame Bankhall Group
Figure 36: Key financial data for Sesame Bankhall Group Limited, 2011 and 2012
Openwork
Figure 37: Key financial data for Openwork Limited, 2011 and 2012
Hargreaves Lansdown PLC
Figure 38: Key financials for Hargreaves Lansdown, 2012 and 2013
Brewin Dolphin
Figure 39: Key financials for Brewin Dolphin Ltd, 2011 and 2012
Figure 40: Key interim financials for Brewin Dolphin, 2012 and 2013

Brand Communication and Promotion

Key points
Retirement planning solution advertising directed at advisers has waned
Figure 41: Advertising expenditure relating to financial advice and intermediaries, by sub-category, 2011-13
Scottish Widows the leading advertiser to pension intermediaries
Figure 42: Top 10 advertisers in the intermediary pensions and retirement income sub-categories, 2011-13
Nearly all advertising is done through the press
Figure 43: Proportional distribution of advertising expenditure on pensions and retirement income advice, by media type, 2011-13

Adviser Business Models

Key points
About Mintel’s financial advice research
Large majority of advisers operate an independent model
Figure 44: Current adviser business model, November 2013
Regulatory demands of independent status may prove too onerous

Key Challenges and New Pension Business Prospects

Key points
Low priority given to retirement savings viewed as the main issue
Figure 45: Biggest challenges facing pension intermediaries, November 2012 and November 2013
Attracting mass-market clients the second-biggest challenge
83% of IFAs expect to grow or maintain new business levels in 2014
Figure 46: New pensions business expectations for the coming year, November 2012 vs. 
November 2013

Impact of Regulatory and Economic Developments

Key points
Advisers positive about consumer confidence in shares and housing
Figure 47: Perceived impact of regulatory and other market developments on own business over the next 12 months, in order of positive influence, November 2013
Advisers divided in their opinions on the effect of the RDR
Figure 48: Perceived impact of the RDR on own business over the next 12 months, 2009-13
Two in five advisers now feel positive about auto-enrolment
Figure 49: Perceived impact of auto-enrolment on own business over the next 12 months, 2011-13
Positive sentiment about investment conditions is highest in five years
Figure 50: Perceived impact of consumer confidence in stock market-based investments on own business over the next 12 months, 2009-13
Figure 51: Perceived impact of consumer confidence in the housing market on own business over the next 12 months, 2009-13
Fewer think the financial industry’s reputation will have an adverse effect
Figure 52: Perceived impact of financial industry’s reputation on own business over the next 12 months, 2009-13

Expected Long-term Impact of Pension Auto-Enrolment

Key points
Auto-enrolment seen as primarily benefiting workplace pension business
Figure 53: Perceived long-term impact of auto-enrolment on intermediaries, November 2013
Longer-term impact in other areas less certain

Appendix – Adviser Share of Individual Pension Business

Figure 54: Total new individual pension business – regular premiums, by sales channel, 2008-12
Figure 55: Total new individual pension business – single premiums, by sales channel, 2008-12

Appendix – Adviser Share of Occupational Pension Business

Figure 56: Total new insurer-administered occupational pension business – regular premiums, by sales channel, 2008-12
Figure 57: Total insurer-administered occupational – single premiums, by sales channel, 2008-12

Appendix – Adviser Share of Retirement Income Business

Figure 58: New pension annuity premiums, by sales channel, 2008-12
Figure 59: New income drawdown premiums, by sales channel, 2008-12

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