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Personal Pensions - UK - April 2017

Published By :

Mintel

Published Date : May 2017

Category :

Banking

No. of Pages : N/A

The individual personal pension market offers good prospects for growth. A larger pool of pension savers due to auto-enrolment and prevailing mobility in the labour market will increase the tendency to accumulate multiple pension pots. In turn, this will drive pension transfer and consolidation activity. Moreover, there is scope to grow regular-premium business by targeting the self-employed and those interested in saving for children.

Table of Content

OVERVIEW
What you need to know
Products covered in this report

EXECUTIVE SUMMARY
The market
Regular-premium business continues to decline…
while single-premium business is boosted by greater transfer activity…
which will continue to drive overall market growth
Figure 1: Forecast of new individual personal and stakeholder pension business – Fan chart, 2011-21
Larger proportion of direct sales in the smaller stakeholder market
Workplace auto-enrolment indirectly benefits the individual sector
Cap on exit fees and a new allowance for pension advice introduced
Companies and brands
Market experiences further consolidation
Aviva’s acquisition of Friends Life makes it a market leader of contract-based pensions
Prototype of Pensions Dashboard near completion
Using the power of digital technology to educate and inform…
and to engage a younger audience
The consumer
Auto-enrolment boosts pension participation, but there are still significant gaps
Figure 2: Private pension ownership, by total sample and those in work, February 2017
64% of individual pension holders are making regular contributions
Figure 3: Proportion of individual pension holders who are making contributions, by pension type, February 2017
The under-45s are the most active contributors
IFAs are the preferred choice for pensions advice
Figure 4: Sources of pension advice most likely to use for each activity, February 2017
Only 63% of individual pension holders know much how they are paying in charges
A much higher proportion are open to switching funds than have actually done so over the past five years
Opportunities for future growth
Figure 5: Intentions to open a (new) personal/stakeholder pension or SIPP, February 2017
52% of 18-40-year-olds are interested in saving for retirement in a LISA
Figure 6: Agreement with statements about LISAs, February 2017
What we think

ISSUES AND INSIGHTS
Scope to target those wishing to save for children
The facts
The implications
The self-employed are an underpenetrated market
The facts
The implications
New Lifetime ISA could pose a threat as a competitor product
The facts
The implications

THE MARKET – WHAT YOU NEED TO KNOW
Volume sales of new regular-premium personal and stakeholder pensions continue to fall
Growth in single-premium business underpinned by greater transfer activity
Larger proportion of direct sales in the smaller stakeholder market
Workplace auto-enrolment indirectly benefits the individual sector
Cap on exit fees comes into force

MARKET SIZE AND FORECAST
Individual personal and stakeholder pensions attract very little virgin business…
Figure 7: New individual personal and stakeholder pension business, 2011-16
…but new pension freedoms have boosted transfer activity
Figure 8: Transfers as a share of new individual personal and stakeholder pension business, 2011-16
The average regular premium has risen over the past two years…
Figure 9: Average new individual personal and stakeholder pension regular premiums – new policies only, 2014-16
...as has the average personal pension transfer premium
Figure 10: Average new individual pension single premium, by type, 2014-16
Market forecast: transfer business will continue to drive growth
Figure 11: Forecast of new individual personal and stakeholder pension business – fan chart, 2011-21
Figure 12: Forecast of new individual personal and stakeholder pension business, 2011-21
Forecast methodology

CHANNELS TO MARKET
IFAs dominate the sale of personal pensions
Figure 13: New individual personal pension business, by sales channel, 2013-16
Distribution mix differs in the smaller stakeholder pension market
Figure 14: New individual stakeholder pension business, by sales channel, 2012-16
Intermediary definitions

MARKET DRIVERS
The number of in-force individual pensions continues to fall…
Figure 15: Number of individual and group pensions in-force and number of occupational DC members, 2003-15
…while the workplace pension sector sees strong growth as a result of auto-enrolment
SIPPs represent the main growth area…
…but there is crossover between streamlined SIPPs and DIY personal pensions
Low-interest rates and rising share prices favour investment

REGULATORY AND LEGISLATIVE CHANGES
New pension freedoms boost attractiveness of pension saving
1% charge cap on early exit fees comes into force
Treasury introduces ‘multiple uses’ pension advice allowance

COMPANIES AND BRANDS – WHAT YOU NEED TO KNOW
Market experiences growing consolidation
Aviva’s acquisition of Friends Life
Development of a Pensions Dashboard is underway
Pension providers harness digital technology
Limited above-the-line adspend

PROVIDER RANKINGS AND MARKET SHARE
Aviva moves into first place following acquisition of Friends Life
Figure 16: Rankings of top 10 providers of insurance-administered individual and group contract-based pension business, by gross premiums, 2015

MARKET DEVELOPMENTS AND INNOVATION
Consolidation activity
Aviva bolsters its position by joining forces with a key competitor
Aegon acquires Cofunds as it looks to become a platform business
Digital activity and new product launches
Helping pension savers understand their choices at retirement
Scottish Widows is working on improving its digital capability
Prototype of a Pensions Dashboard due to be unveiled imminently
Prudential launches flexible personal pension

ADVERTISING AND MARKETING ACTIVITY
Pension providers spend very little on above-the-line advertising
Figure 17: Total above-the line, online display and direct mail advertising expenditure on pension products and advice, 2011/12-2015/16
Aviva’s digital campaign
Nielsen Ad Intel coverage

THE CONSUMER – WHAT YOU NEED TO KNOW
Only 45% of the self-employed have a private pension
64% of individual pension holders are making regular contributions
IFAs are the preferred choice for pensions advice
Only 63% of individual pension holders know how much they are paying in charges
Opportunities for future growth
52% of 18-40-year-olds are interested in saving for retirement in a LISA

PENSION OWNERSHIP
Around a third of UK adults still have no pension savings…
Figure 18: Private pension ownership, by total sample and selected demographic groups, February 2017
…with ownership lowest among non-workers
10% of adults don’t know if they have an individual or group pension
Many people have multiple pension pots
Figure 19: Cross-analysis of private pension ownership, by type of pension, February 2017

PENSION CONTRIBUTION ACTIVITY
69% of individual pension holders are making contributions
Figure 20: Proportion of individual pension holders who are making contributions, by pension type, February 2017
The under-45s are the most active contributors

SOURCES OF PENSION ADVICE
IFAs seen as main source of advice for personal pensions
Figure 21: Sources of pension advice most likely to use for each activity, February 2017
Over-45s prefer to speak to an adviser in person or over the phone

PENSION ENGAGEMENT AND SWITCHING ACTIVITY
73% of individual pension savers read their annual benefit statement
Figure 22: Agreement with statements about pension understanding, switching activity, satisfaction with performance and alternative savings, February 2017
Individual pension providers have to be proactive
Individual pension providers are not required to annually disclose all charges to customers
59% of individual pension holders have online access
60% are pleased with how their pension is performing
60% are open to switching funds

FUTURE CONSIDERATION OF PERSONAL PENSIONS
Good scope to attract new customers
Figure 23: Intentions to open a (new) personal/stakeholder pension or SIPP, by total sample and existing pension holders, February 2017
9% of adults would consider opening a personal pension for someone else

INTEREST IN LISAS AMONG TARGET AGE GROUP
Around half of under-40s would be interested in opening a LISA to save for their retirement
Figure 24: Agreement with statements about LISAs, February 2017
Putting the threat into context
Figure 25: Agreement with (selected) statements about LISAs, by existing pension holders, February 2017

APPENDIX – MARKET SIZE AND FORECAST
Total market forecast – Best- and worst-case scenarios
Figure 26: Forecast of individual personal and stakeholder pension premiums – best- and worst-case scenarios, 2016-21
Regular-premium sector
Figure 27: Forecast of new regular-premium individual personal and stakeholder pension business – fan chart, 2011-21
Figure 28: Forecast of individual personal and stakeholder pension regular premiums – best- and worst-case scenarios, 2016-21
Single-premium sector
Figure 29: Forecast of new single-premium individual personal and stakeholder pension business – fan chart, 2011-21
Figure 30: Forecast of individual personal and stakeholder pension single premiums – Best- and worst-case scenarios, 2016-21
Forecast Methodology

APPENDIX – DATA SOURCES AND ABBREVIATIONS
Abbreviations
Consumer research methodology

List of Table

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