Personal Pensions: Inc Impact Of COVID-19 - UK - August 2020

Personal Pensions: Inc Impact Of COVID-19 - UK - August 2020

  • Mintel
  • August 2020
  • Banking
  • 0 pages

Report Description

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COVID-19’s impact on the individual pensions market should be relatively short-lived. The key target market of affluent professionals has been less impacted financially, with many seeing a boost to their finances with a drop in expenses related to commuting and leisure. Once confidence improves, providers should experience an upturn in demand as those who have delayed retirement planning decisions become more comfortable about locking money away into privately arranged pension plans.

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Table of Contents

OVERVIEW

Key issues covered in this Report
Products covered in this Report
COVID-19: market context
Economic and other assumptions

EXECUTIVE SUMMARY
The market
Outlook in light of COVID-19
Figure 1: Expected impact of COVID-19 on individual pensions, short, medium and long term, August 2020
Total new premiums expected to fall by 10% in 2020
Figure 2: Forecast of the value of new individual pension business, 2015-25
Continued decline in SIPP new single-premium business expected
Non-advised sales continue their gradual ascent
Rising unemployment will hamper new and existing business
Figure 3: Annual unemployment rate (forecast), 2007-24
FCA clamps down on questionable DB to DC pension transfers
DWP leading efforts to increase pension take-up among the self-employed
Companies and brands
Royal London and Aviva lead in individual pensions market
Hargreaves Lansdown is the largest SIPP provider
Market leaders work to enhance their retirement product offerings
New product developments continue to reshape the SIPP segment
The consumer
Consumer confusion over personal pension ownership
Figure 4: Type of pension owned, June 2020
Those saving regularly into an individual pension the most engaged
Figure 5: Actions taken with individual and group pensions over the past 12 months, June 2020
Just over two fifths of savers say COVID-19 has impacted their pension
Figure 6: Impact of COVID-19 outbreak on individual and group pensions, June 2020
A third express interest in arranging an individual pension
Figure 7: Proportion of UK adults who would consider arranging an individual pension product in the future, June 2020
Fees and charges most influential when choosing a provider
Figure 8: Important factors when choosing a personal pension provider, June 2020
What we think

IMPACT OF COVID-19 ON THE INDIVIDUAL PENSIONS MARKET
Impact on the market
Job market malaise will hinder new business opportunities…
but many existing pension holders are in a strong position to maintain their contributions
Increased government spending could lead to changes in pension tax relief
Impact on consumers
Two fifths of savers say their individual pension has been impacted by COVID-19
One in four Millennials’ personal pension savers have reduced contributions
Increased focus on savings could help boost demand for pensions
Impact on companies and brands
Providers act to provide guidance about avoiding COVID-19 pension scams
The crisis has highlighted the value of enhanced control and flexibility

ISSUES AND INSIGHTS
COVID-19 has opened a new opportunity to engage with the key target market
Low-cost easy-to-manage products key to attracting new customers

THE MARKET – KEY TAKEAWAYS
Total new premiums expected to fall by 10% in 2020
But sector is in a good position to weather the crisis
Continued decline in SIPP new single-premium business expected
Non-advised sales will continue to increase
Regulatory activity will dampen transfer activity
Longer-term projects have scope to drive new business opportunities

MARKET SIZE AND FORECAST
Outlook in light of COVID-19
Short-, medium- and long-term impact on the industry
Figure 9: Expected impact of COVID-19 on individual pensions, short, medium and long term, August 2020
Lockdown
Re-emergence
Recovery
Individual pension market smaller following auto-enrolment
COVID-19 hits new business prospects…
but H2 2020 should deliver an improvement in sales
Figure 10: New individual pension business, 2016-20
APE expected to fall below £1.5bn in 2020
Figure 11: New individual pension business (APE), 2014-20
Market forecast
Improving consumer sentiment will provide a temporary boost
Figure 12: Forecast of the value of new individual pension business, 2015-25
Figure 13: Forecast of the value of new individual pension business, 2020-25
Market drivers and assumptions
Figure 14: Key drivers affecting Mintel’s market forecast (prepared on 18 August 2020), 2015-25
Lessons from the financial crisis
Figure 15: New individual pension business, total value of new regular premiums, 2007-15
Figure 16: New individual pension business, value of regular premiums, by type of pension, 2007-15
Forecast methodology

MARKET SEGMENTATION
Personal pension and insured SIPP new single premiums fall sharply
FCA data also indicate a fall in the SIPP segment
Regular premium stakeholder segment continues to shrink
Figure 17: Number of new individual personal pension, stakeholder pension and insured SIPP sales, 2016-19
Figure 18: Value of new individual personal pension, stakeholder pension and insured SIPP sales, 2016-19
Transfer business falls sharply in 2019
Figure 19: Transfers as a share of new individual pension business, by product type, 2015-19

CHANNELS TO MARKET
Non-advised sales continue to rise
IFAs remain the primary channel for new personal pension premiums
Figure 20: New individual personal pension business, by sales channel, 2015-19
Non-advised sales are most prevalent in stakeholder pensions
Figure 21: New individual stakeholder pension business, by sales channel, 2015-19
Most new insured SIPP business still done via IFAs
Figure 22: New individual insured SIPP business, by sales channel, 2015-19
Streamlined SIPPs more commonly sold without advice

MARKET DRIVERS
Unemployment set to rise dramatically
Figure 23: Annual unemployment rate (forecast), 2007-24
Number of self-employed workers drops following outbreak
Figure 24: Number of self-employed workers aged 16 years and older (seasonally adjusted), March to May 2010 to March to May 2020
Saving in a pension a minority pursuit for the self-employed
Self-employed numbers likely to be boosted over the longer term
Financial market instability impacting pension fund values
Workplace pension membership up sharply due to auto-enrolment
Figure 25: Proportion of employees who are enrolled in a workplace pension, 2010-19

REGULATORY AND LEGISLATIVE ENVIRONMENT
DWP seeking to apply elements of auto-enrolment to the self-employed
Pensions Dashboards remain a work in progress
Pension tax relief under review
FCA introduces sweeping changes to pension transfer advice

COMPANIES AND BRANDS – KEY TAKEAWAYS
Price competition set to intensify in the low-cost SIPP market
New product development focuses on flexible contributions
Market leaders work to enhance their retirement product offerings

MARKET SHARE/PROVIDER RANKINGS
Royal London and Aviva the market leaders
Royal London records a decline in sales but grows market share
Workplace pensions drive growth in pension sales at Aviva
Prudential saw a decline in DB transfer business in 2019
Scottish Widows posts mixed results
Figure 26: Rankings of top 20 providers of individual and work-based pension business, by gross written premiums, 2016-18
Hargreaves Lansdown is the leading SIPP provider
Other key players in the SIPP market

COMPETITIVE STRATEGIES
Providers issue consumer warnings about COVID-19-related scams
Market leaders increasing their focus on retirement planning
Aviva creates new Investments, Savings & Retirement business division…
and takes complete ownership of Wealthify
Prudential UK saving and investment business now part of M&G plc
M&G acquires Ascentric platform from Royal London
SIPP specialist Curtis Banks bolsters its offering via new acquisitions
Interactive Investor acquires rival The Share Centre…
and offers a fee-free SIPP for a year in response to COVID-19
Notable new product launches
Vanguard’s new low-cost SIPP places pricing pressure on platforms
Wealthify unveils SIPP with instant 25% tax relief on contributions
Moneybox launches mobile SIPP offering following successful pilot

THE CONSUMER – KEY TAKEAWAYS
Reported financial well-being has been solid despite COVID-19 upheaval
Opportunities for future pension consolidation
Millennial pension savers are the most active users
COVID-19 drives engagement in personal pensions
Significant interest in personal pension ownership
Ethical investment options are key to attracting younger savers

IMPACT OF COVID-19 ON CONSUMER BEHAVIOURS
Consumers’ sense of financial well-being has persevered
Figure 27: The Financial Wellbeing Index, January 2015-July 2020
Reduced spending and government intervention has helped to stabilise household finances…
More affluent professional workers may have scope to boost pension saving
Figure 28: How consumers have been affected or changed their behaviour as a result of COVID-19, 21-28 May 2020
however, more than a quarter are worse off since the start of the outbreak
Figure 29: Changes in financial situation since the start of the COVID-19 outbreak, 30 July-7 August 2020
Widespread concern about impact on economic and job prospects
Figure 30: Consumer views on the impact of the COVID-19 outbreak on the UK economy and their own finances, 18-24 June 2020
The outbreak has altered savings priorities
Figure 31: Savings priorities, October 2019 vs May 2020

PENSION OWNERSHIP
Pension ownership has expanded greatly under auto-enrolment…
but individual pension ownership remains relatively low
Figure 32: Type of pension owned, June 2020
The self-employed are a compelling but difficult to reach target market…
but upcoming developments should boost sales in coming years
Multiple pension ownership increasingly common
Figure 33: Number of pension pots owned, by pension ownership, June 2020

ACTIVE PENSION SCHEME PARTICIPATION
One third of pension owners are contributing to an individual pension
Figure 34: Proportion making regular contributions into their pension(s), June 2020
Stakeholder pension owners most likely to be contributing regularly
Figure 35: Proportion making regular contributions into their pension(s), by pension ownership, June 2020
25% active in a workplace scheme also adding to an individual pension
Figure 36: Proportion making regular contributions into their pension(s), by type of pension being regularly contributed to, June 2020

RECENT INDIVIDUAL PENSION ACTIVITY
Half have reviewed their pension in the past year
Figure 37: Actions taken with individual and group pensions over the past 12 months, June 2020
Fewer than a fifth of over-55s have started to draw on their pensions
Heightened level of engagement among active individual pension owners
Figure 38: Actions taken with individual and group pensions over the past 12 months, by type of pension being regularly contributed to, June 2020
Millennials have been particularly active in the past year
Figure 39: Actions taken with individual and group pensions over the past 12 months, by generation, June 2020

IMPACT OF COVID-19 ON MANAGEMENT OF PERSONAL PENSIONS AND SIPPS
More than two fifths say COVID-19 has had an impact on their behaviour
Figure 40: Impact of COVID-19 outbreak on individual and group pensions, June 2020
Few over-55s say their retirement plans have been altered
Millennials are the most likely to have modified contribution levels
Figure 41: Impact of COVID-19 outbreak on individual and group pensions, by generation, June 2020
Opportunity for providers to help savers keep up with contributions

INTEREST IN ARRANGING A PERSONAL PENSION OR SIPP
A third of UK adults would consider getting an individual pension
Figure 42: Proportion of UK adults who would consider arranging an individual pension product in the future, June 2020
Lack of widespread interest among the self-employed
Encouraging level of interest among younger generations
Nearly half who have group scheme would consider an individual one
Figure 43: Proportion of UK adults who would consider arranging an individual pension product in the future, by pension ownership, June 2020

IMPORTANT FACTORS WHEN CHOOSING A PERSONAL PENSION PROVIDER
Fees and charges top the list of important features
Figure 44: Important factors when choosing a personal pension provider, June 2020
Younger savers most likely to value social responsibility
Figure 45: Selected important factors when choosing a personal pension provider, by generation, June 2020

APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Consumer research methodology

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