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Personal Pensions - UK - April 2016

Published By :

Mintel

Published Date : Apr 2016

Category :

Banking

No. of Pages : N/A

The pension freedoms brought renewed interest to the personal pensions market in 2015. However, the pace of legislative and regulatory change is undermining confidence in pension savings, with consumers looking towards alternative investments to fund retirement. As such, pension providers should continue to focus on improving access to education and advice in order to help consumers realise the benefits of saving in a pension.

Table of Content

Overview

What you need to know
Products covered in this Report
Personal pensions
Individual stakeholder pensions
Products not covered in this Report

Executive Summary

The market
Regular premiums grew by 20% in 2015
Figure 1: New personal pension and individual stakeholder pension business, 2011-15
But regulatory change inhibits personal pension contributions
Personal pensions compete with ISAs…
and SIPPs grow in popularity
Majority of personal pensions sold via independent advisers
Companies and brands
Lloyds Banking Group retains biggest market share
Figure 2: Ranking of individual pension providers – UK, by GWP relating to total individual pension business*, 2013 and 2014
Investment in digital
Scrapping early exit fees
The consumer
15% of non-retirees have a personal pension
Figure 3: Pension product ownership, December 2015
Affordability is the biggest barrier to personal pension savings
Figure 4: Barriers to owning or contributing to a personal pension, December 2015
Nearly a fifth of personal pension holders prefer to save or invest elsewhere
Figure 5: Attitudes towards personal pensions and saving for retirement, December 2015
Online information most commonly used source
Figure 6: Expected sources of information about personal pensions, December 2015
Changing pension rules is undermining saving for retirement
Figure 7: Attitudes towards pensions and saving for retirement, December 2015
What we think

Issues and Insights

Reliance on familial advice offers a route to pension conversations
The facts
The implications
Workplace pensions scheme moves responsibility for saving enough away from consumers
The facts
The implications
Affordability will still inhibit take-up of robo-advice
The facts
The implications

The Market – What You Need to Know

Regular personal pension premiums increase by 20%
Pension freedoms reverse downward trend in premium contributions
Lifetime ISA will provide competition to personal pensions
SIPP volumes grow
Majority of personal pensions sold via independent advisers

Market Size and Forecast

Significant increase in regular and premium business
Figure 8: New personal pension and individual stakeholder pension business, 2011-15
Over two thirds of new business are transfers
Figure 9: Transfers as a share of new personal and individual stakeholder business, 2011-15
Market forecast
Figure 10: Forecast for new regular personal pension and individual stakeholder pension premiums, 2015-20
Figure 11: Forecast for new regular personal pension and individual stakeholder pension premiums, 2015-20
Forecast methodology

Market Drivers

Auto-enrolment brings focus to pensions…
but pensions compete with ISAs for contributions
Spenders rather than savers
Earnings growth increases ability to save
Figure 12: Consumer price index and average weekly earnings growth, 2011-16
SIPPs appeal to a wider audience

Regulatory and Legislative Developments

Pension freedoms reverse downward trend
New Lifetime ISA will compete with personal pensions…
but many would be better off continuing to save in a pension
Pension tax relief reform on hold – for now
Financial Advice Market Review
Making advice more affordable
Improving communications with consumers
Early exit charge limits
Wider regulatory changes on the horizon

Channels to Market

Regulation has affected the availability of advice…
but the FAMR outlines plans to tackle the issue
Majority of personal pensions sold via independent advisers
Figure 13: New personal pension business, by sales channel, 2014-15
Figure 14: New individual stakeholder pension business, by sales channel, 2014-15

Key Players – What You Need to Know

Lloyds retains biggest market share
Investing in digital services
Scrapping exit fees
Adspend increases dramatically due to government activity

Market Share

Top five represent two thirds of all pension business
Lloyds Banking Group maintains top position
Consolidation yet to be reflected in the rankings
Figure 15: Ranking of individual pension providers – UK, by GWP relating to total individual pension business*, 2013 and 2014

Competitive Strategies

Investment in digital
Robo-advice platforms
At-retirement advice
Scrapping early exit fees
Minimum contribution amounts
Figure 16: Minimum contribution amounts, for selected providers, March 2016
Busy period for mergers and acquisitions
Aviva buys Friends Life
L&G sells Suffolk Life
Swiss RE buys Guardian Financial Services
Old Mutual splitting business into four areas

Advertising and Marketing Activity

Overall pension adspend nearly doubles in 2015…
Figure 17: Total above-the line, online display and direct mail advertising expenditure on pensions, 2011-15
but personal pension adspend remains a small proportion of overall total
Figure 18: Total advertising expenditure on pension and retirement income products, by sub-category, 2011-15
DWP tops list of advertisers
Figure 19: Top 10 advertisers of pension products (excluding retirement income products), 2013-15
Nielsen Media Research coverage

The Consumer – What You Need to Know

57% of non-retirees own a pension
Affordability inhibits personal pension ownership
Over-45s prefer a conservative approach to pensions
Younger consumers prefer informal sources of information
Pensions seen as difficult to understand

Pension Ownership

57% of non-retirees own a pension…
but two in five have no pension savings
Personal pension ownership is falling
Interest in SIPPs is rising
Figure 20: Pension product ownership, December 2015
Self-employed are more likely to own a personal pension
Figure 21: Pension product ownership, by employment type, December 2015
Traditional gender roles affect personal pension ownership
59% of personal pension holders are regular contributors
Figure 22: Regular contribution to personal pension, December 2015

Barriers to Personal Pension Ownership

Workplace pensions biggest barrier to personal pension contributions
Self-employed are less likely to be able to afford to save
More people seeing the benefits of property development
Millennials need access to education on pensions
Figure 23: Barriers to personal pension ownership, December 2015
18-24s are more likely to be in a position to save
Figure 24: Age, by financial situation, December 2015
Personal pension contributions inhibited by lack of earnings
Figure 25: Agreement with the statement ‘I don’t earn enough to contribute to a personal pension’, by pension ownership, December 2015

Attitudes of Personal Pension Holders

Personal pension holders prefer a conservative approach
Figure 26: Attitudes towards personal pensions and saving for retirement, December 2015
Nearly a fifth prefer to save or invest elsewhere
A fifth are interested in managing their own investments
Figure 27: Attitudes towards personal pensions and saving for retirement, December 2015

Expected Sources of Information for Personal Pensions

Online sources and IFAs rank highly
Figure 28: Expected source of information for personal pensions, December 2015
Wealthier households value the advice given by IFAs
Figure 29: Expected source of information for personal pensions, by household income, December 2015
Younger people prefer more informal advice
Figure 30: Expected use of family and friends as a source of information, by age, December 2015
Partner with employers to offer professional advice
Using one source of information is enough
Figure 31: Expected source of information for personal pensions – Repertoire – December 2015

Attitudes towards Pensions and Saving for Retirement

Confusion around pensions needs to be addressed
Education and tracking tools could boost engagement
Frequent changes disrupt retirement planning
Figure 32: Attitudes towards pensions and saving for retirement, December 2015
Online offers an alternative to professional F2F advice
Figure 33: Expected source of information for personal pensions, by agreement with the statement ‘It is worth paying for professional advice about pensions’, December 2015
Parents see the worth in professional advice
Figure 34: Attitudes to pensions and saving for retirement – CHAID – Tree output, December 2015

Appendix – Data Sources, Abbreviations and Supporting Information

Abbreviations
Consumer research methodology
CHAID Methodology

Appendix – Market Size and Forecast

Market forecast
Figure 35: Forecast for new regular personal pension and individual stakeholder pension premiums, 2015-20
Forecast methodology

List of Table

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