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Workplace Pensions - UK - June 2015

Published By :

Mintel

Published Date : Jun 2015

Category :

Banking

No. of Pages : N/A

The workplace pension supply chain has been hit with double-edged reform over the past few years – first with auto-enrolment and now with pension freedoms. The freedoms have drawn due attention from the industry, but more work is needed to plug the advice gap and support savers as they reach retirement. Auto-enrolment continues to pose challenges, as rafts of small businesses are set to reach their staging dates over the next few years.
Table of Content

Introduction

Product definition
Occupational pensions
Group pensions
Abbreviations

Executive Summary

The market
Auto-enrolment has reversed the decline in workplace pension ownership…
Figure 1: Proportion of employees with workplace pensions, by type of pension, 2005-14
but the biggest challenges will come in the smallest packages
Figure 2: Auto-enrolment staging volumes forecast, by quarter
Strong growth in new insurer business is expected to continue into 2020
Figure 3: Forecast of total insurer-administered new workplace pension premiums, fan chart, 2015-20
The market continues to be divided between contract-based and trust-based pensions
Figure 4: Pension scheme types declared by employers in compliance with auto-enrolment, as at 31 March 2014
The consumer
Pension reforms encourage a greater focus on retirement savings
Figure 5: Prioritisation of retirement savings, March 2015 versus April 2014
8% of employees unsure if their employer offers a workplace pension
Figure 6: Proportion of main employers offering a workplace pension scheme, March 2015
84% of employees that have access to a workplace scheme are members
Figure 7: Membership of main employer’s workplace pension scheme, March 2015
19% of employees admit they don’t know what type of pension they have
Figure 8: Pension type, by employer sector, March 2015
Auto-enrolment awareness stalls as attentions turn to pension freedoms
Figure 9: Awareness of workplace pension auto-enrolment
The media has reached further than employers or pension providers on auto-enrolment
Figure 10: Sources of auto-enrolment knowledge, March 2015
Three quarters value the importance of a good pension in a job offer
Figure 11: Influence of workplace pension on job offer selection, March 2015
Employees expect more support from their employers
Figure 12: Attitudes towards employers and financial planning, March 2015
Uncertainty is holding people back from good at-retirement decisions
Figure 13: Attitudes towards retirement and the pension system, March 2015

Issues and Insights

The popularity of DC schemes has shifted pension risk from employers to employees
The facts
The implications
The advice gap threatens effective decision making
The facts
The implications
Pension pots under attack as scammers seek to exploit the new freedoms
The facts
The implications

The Market – What You Need to Know

Workplace pension ownership driven up by auto-enrolment
Insurers focus on group pensions but trust-based options are catching up
Auto-enrolment to bring fresh challenges with smallest employers
Advisers dominate contract-based scheme distribution

Workplace Pension Ownership

Auto-enrolment has successfully reversed the decline in pension ownership…
Figure 14: Proportion of employees with workplace pensions, by type of pension, 2005-14
and the private sector is driving the shift to DC schemes
Figure 15: Proportion of employees with workplace pensions, by employer sector and type of pension, 2014
Figure 16: Proportion of employees with workplace pensions, by age band and type of pension, 2014
Women outrank men on workplace pension membership
Figure 17: Proportion of employees with workplace pensions, by working pattern and gender, 2014
Note on Annual Survey of Hours and Earnings data

Insurer-administered Market Size

Group schemes are the main market for insurance companies…
Figure 18: New insurer-administered group contract-based pension business (volume and value), 2010-14
but trust-based scheme membership is stepping up
Figure 19: New insurer-administered occupational trust-based pension business (volume and value), 2010-14*

Insurer-administered Market Forecast

Strong growth expected on the back of auto-enrolment
Figure 20: Forecast of total insurer-administered new workplace pension premiums, fan chart, 2015-20
Forecast methodology
Fan chart explanation

Market Drivers

The market is split evenly between trust- and contract-based schemes…
Figure 21: Number of insurer-administered trust-based scheme members and contract-based pension policies in force, 2009-13
and auto-enrolment has reinforced the divide
Figure 22: Pension scheme types declared by employers in compliance with auto-enrolment, as at 31 March 2014
Master trusts have yet to reach their full potential
Figure 23: Trust-based scheme types declared by employers in compliance with auto-enrolment, as at 31 March 2014
Big business has driven uptake but the biggest challenges are yet to come
Figure 24: Auto-enrolment staging volumes forecast, by quarter
Figure 25: Proportion of employees with workplace pensions, by sector and size of employer, 2014*
Opt-out rates are running much lower than expected
Figure 26: Declaration of compliance, automatic enrolment, 2013-15
44% of people are now actively contributing to a workplace pension…
Figure 27: Active pension ownership, by scheme type, 2012-14
but popular DC schemes draw low contributions
Figure 28: Minimum contribution schedule for auto-enrolment schemes
Figure 29: Proportion of employees with workplace pensions, by banded rate of contribution and pension type, 2014
Highest number of UK employers in more than a decade
Figure 30: Estimated number of employers in the private sector, UK, 2000-14*
Growing DB liabilities are encouraging employers to derisk
Figure 31: In-force bulk buyout/buy-in business, funds under management, 2009-13
New pension freedoms are influencing the perception of workplace pensions

Channels to Market

Most contract-based schemes are sold through advisers…
Figure 32: Proportional distribution of total insurer-administered new premium, by pension type and sales channel, 2014

Key Players – What You Need to Know

Companies starting to address post-reform gaps
Risk transfer business attracts greater investment from smaller players
Reforms attract growing adspend from insurers and advisers

Company Strategies

More than just a provider
Scottish Widows
Aviva
Just Retirement
Innovating to meet pension freedoms could pay dividends
Aviva
BlackRock
Retirement Advantage (MGM Advantage and Stonehaven)
Out-of-the-box auto-enrolment solutions transition smoothly from medium to small employers
AE in a Box

Insurer Rankings

Aviva puts its clout behind trust-based pensions…
…and transfer business encourages entry into the contract-based market
Figure 33: Insurer-administered pension provider rankings, individual and work-based pensions business, based on total UK gross premiums in 2013
Figure 34: Insurer-administered pension provider rankings, trust-based pensions business, based on total UK gross premiums in 2013

Brand Communication and Promotion

Pension adspend has grown in line with reforms
Figure 35: Recorded above-the-line, online display and direct mail advertising expenditure on pensions*, 2010/11-2014/15
Adspend is highest for TV campaigns, driven by the DWP
Figure 36: Proportional distribution of recorded above-the-line, online display and direct mail advertising expenditure on pensions*, by media type, 2012/13-2014/15
Advisers spend heavily to make the most of high demand
Figure 37: Top ten for recorded above-the-line, online display and direct mail advertising expenditure on pensions*, 2012/13-2014-15
Note on NMR data

The Consumer – What You Need to Know

Active pension ownership retains growth but there is still work to be done
Pension reforms have raised the priority level of retirement savings
Some people are still not sure if their employer offers a pension
Most employees join or stay in their employers workplace scheme when offered
The media is the top source of information on auto-enrolment
Most employees say a generous pension would help them decide between job offers
Employers are playing a lesser role in retirement planning than employees would like
Workers are uncertain about the pension system and the options available to them at retirement

Active Pension Ownership

Workplace pensions hold onto early auto-enrolment growth…
Figure 38: Active pension ownership, by scheme type, 2012-14
but some demographics have been overlooked
Figure 39: Active workplace pension ownership, by gross annual household income, December 2014

Prioritisation of Retirement Savings

45% of employees consider retirement savings to be a high priority…
Figure 40: Prioritisation of retirement savings, April2014 versus March 2015
and older people react strongly to pension reforms
Figure 41: Very high or fairly high prioritisation of retirement savings, by age, April2014 versus March 2015

Employers and Pension Schemes Offered

1 in 4 people work for a small private business
Figure 42: Main employer sector and size, March 2015
1 in 10 aren’t sure if their employer offers a pension scheme
Figure 43: Proportion of main employers offering a workplace pension scheme, March 2015

Workplace Pension Scheme Membership

Most employees offered a workplace pension, choose to participate
Figure 44: Membership of main employer’s workplace pension scheme, March 2015
Part-time employees twice as likely to shun pensions than full-time employees
Figure 45: Proportion of employees that are not a member of their main employer’s workplace pension scheme, by working pattern, March 2015

Type of Workplace Pension

A fifth of pension holders don’t know what type of pension they have…
Figure 46: Pension type, March 2015
Figure 47: Pension type, by employer sector, March 2015
and the effect is most pronounced among the lower earners
Figure 48: Proportion of employees not sure what kind of pension scheme they are a member of, by gross annual household income, March 2015

Auto-enrolment Awareness

Awareness has stalled now the initial buzz has faded…
Figure 49: Awareness of workplace pension auto-enrolment, March 2015
and the lowest income groups are in the dark
Figure 50: No awareness of workplace pension auto-enrolment, by gross annual household income, March 2015
DWP media campaign drives auto-enrolment awareness…
Figure 51: Sources of auto-enrolment knowledge, March 2015
and 61% have consulted just one source of auto-enrolment information
Figure 52: Repertoire analysis of sources of auto-enrolment knowledge, March 2015
Figure 53: Sources of auto-enrolment knowledge, by repertoire analysis, March 2015

The Relative Importance of Workplace Pensions

The majority say a generous pension makes a difference…
Figure 54: Influence of workplace pension on job offer selection, March 2015
…but 35-44-year-olds are less responsive
Figure 55: Proportion of people that said a more generous workplace pension would make no difference to their job offer selection, by age, March 2015

The Role of Employers in Financial Planning

Many workers expect their employers to support them with financial planning…
Figure 56: Attitudes towards employers and financial planning, March 2015
…and 45-54s feel cut adrift just as they approach retirement
Figure 57: Agreement with the statement ‘My employer has been really valuable in helping me to make decisions about my financial future’, by age, March 2015

Attitudes towards Retirement and the Pension System

Uncertainty and worry over the retirement landscape are rife…
…while providers need to work on improving trust
A personal touch can improve engagement
Figure 58: Attitudes towards retirement and the pension system, March 2015

Appendix – Market Size and Forecast

Figure 59: Best and worst case forecast of total insurer-administered new workplace pension premiums, 2015-20

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