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The UK Pre-Retirement Pensions Market 2018

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Published Date : Sep 2018

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No. of Pages : 53 Pages

The UK Pre-Retirement Pensions Market 2018


"The UK Pre-Retirement Pensions Market 2018", report discusses recent legislation such as changes to the state pension and auto-enrolment, as well as market sizing, distribution, and how people are saving their pensions. The size of the pensions market has been forecast to 2022. The report explores the attitudes and behavior of consumers when it comes to saving and preparing for retirement. There is also a focus on how technology and robo-advice can encourage pension saving and understanding of pension options.

The pensions market is growing as awareness of the need for individuals to save and provide for themselves outside of the state pension is increasing. The pensions market remained steady at 10.56bn annual premium equivalent (APE) in 2017, but is forecast to reach 12.7bn APE by 2022. Individual pensions have grown as self-invested personal pensions (SIPPs) and personal pensions have risen in popularity due to transfers of defined benefit pensions. Meanwhile auto-enrolment will continue to be a big driver of growth for workplace pensions as minimum contributions increase.

Pension providers must seek to improve customer engagement with pension saving. Many individuals do not know how much their pension pots are worth, and the majority of those who do, say their pot is small (under 10,000). Financial advice on pensions also needs to be made more accessible and affordable for all. Technology is key to the development of affordable, easy-to-use, convenient tools that consumers can use to understand how much they have already saved, and how much more they need to be saving to achieve a desired income and quality of life in retirement.


- 42.3% of those starting a pension due to auto-enrolment said rises in pension contributions were good news as saving for retirement is really important.
- Nearly a quarter of individuals (24.1%) do not know how much their pension is worth. Of those who did, over half stated their main pension pot was worth less than 10,000.
- Most desire a monthly retirement income of between 1,000 and 1,999.

Reasons to buy

- Understand the impacts of recent legislation on consumer behavior in the pre-retirement market.
- Discover how technology and robo-advice can be used to encourage individuals to save for retirement.
- See how the UK pensions market is forecast to grow over the next five years.
Table of Contents
1.1. Pension providers must embrace technology to help consumers save 1
1.2. Key findings 1
1.3. Critical success factors 1
2.1. Introduction 9
2.1.1. The government is trying to reduce reliance on the state pension 9
2.1.2. The UK population is aging 9
2.1.3. An aging population is putting pressure on the state pension 10
2.1.4. The Government Actuarys Department reports that the state pension could run out by 2032 10
2.1.5. Finding a solution for the state pension is a dilemma for intergenerational wealth 11
2.1.6. The state pension age is increasing to relieve pressure on the state pension 11
2.1.7. Individuals will be working for longer and later into life 12
2.1.8. Life expectancy is stagnating, which should be acknowledged in reviewing the SPA 12
2.1.9. Some retire at 55, but most wait until they are at least 65 and can access the state pension 13
3.1. Pension saving is more important than ever 14
3.1.1. Individuals must make their own pension savings outside of the state pension 14
3.1.2. The UK pensions market remains steady at 10.56bn APE in 2017 14
3.1.3. The individual pensions market has grown due to SIPPs 15
3.1.4. Work-based pensions have grown their share of the market 16
3.1.5. Trust-based pension premium fell significantly in 2017 16
3.1.6. The total pension market is expected to grow to be worth 12.7bn APE by 2022 17
3.2. Auto-enrolment is the government solution to boost pension savings 18
3.2.1. Auto-enrolment was introduced to improve individual pension saving 18
3.2.2. All employers are now providing a workplace pension to eligible employees 18
3.2.3. 1.23 million UK businesses are now required to provide workplace pensions 19
3.2.4. It is estimated that 17.7 million individuals are now saving through auto-enrolment 19
3.2.5. Auto-enrolment has benefited younger workers the most 20
3.2.6. Minimum auto-enrolment contributions will reach 8% by 2019 20
3.2.7. Total minimum contributions of 8% will not be enough to fund retirement on its own 21
3.2.8. The industry has been fearful of opt-out rates 21
3.2.9. Despite industry fears, individuals are supportive of higher pension contributions 22
3.2.10. Proposals seek to lower auto-enrolment eligibility to 18 and remove the lower earnings limit 23
3.2.11. The next step is encouraging pension saving among the self-employed and the gig economy 24
3.2.12. The employment rights of gig workers is in the media spotlight, which could impact pensions 24
3.3. There has been a shift away from defined benefit schemes 24
3.3.1. Employers have moved away from providing defined benefit pensions 24
3.3.2. Companies have been de-risking their defined benefit schemes through buyouts 25
3.3.3. Individuals are transferring out of defined benefit pensions due to high transfer values 25
3.3.4. The FCA is cracking down on improving the quality of pension transfer advice 26
3.4. Pension pot characteristics and saving attitudes 26
3.4.1. Workplace pensions are the most common type of pension held 26
3.4.2. Most individuals only have one workplace pension 27
3.4.3. There is a shift towards defined contribution pensions 28
3.4.4. A quarter of individuals dont know how much their pension is worth 29
3.4.5. Over half of individuals stated their main pension pot was worth less than 10,000 30
3.4.6. The average pension pot held by those aged 45-55 is worth around 70,000 31
3.4.7. Women have smaller pension pots than men 31
3.4.8. An income equivalent to two thirds of working age income should be saved for retirement 32
3.4.9. Most desire a monthly retirement income between 1,000 and 1,999 32
3.4.10. Half of UK individuals plan to retire at state pension age 33
3.4.11. Most individuals contribute between 2% and 5% of their income into their pension 35
3.4.12. Pensions remain the main way individuals plan to fund retirement 36
4.1. Aviva tops the competitor market for pensions 37
4.1.1. Aviva ranks as the leading provider for individual and workplace pensions 37
4.1.2. NEST, the government pension scheme for auto-enrolment, has nearly 6.5 million members 38
4.1.3. Tighter regulation of master trusts is predicted to cause scheme closures and consolidation 38
4.1.4. The Lifetime ISA could be scrapped 38
5.1. The advice gap is wide for pensions 40
5.1.1. The independent advice channel dominates for pensions 40
5.1.2. The wealthy seek advice, but there is an advice gap for those with smaller pension pots 41
5.1.3. Over a third of savers have never reviewed their pension plan 42
5.2. Technology must be used to improve pension saving engagement 43
5.2.1. The industry must make pension saving a higher priority for individuals 43
5.2.2. The industry needs to develop tools to help people understand their pension saving progress 43
5.2.3. The Pensions Dashboard is under threat of being scrapped 43
5.2.4. Pension providers need to make checking pension value as easy as checking a bank account 44
5.2.5. Aviva customers can now ask Amazon Alexa what the value of their pension is 44
5.2.6. Open banking is a new opportunity pension providers must embrace 45
5.2.7. Starling has teamed up with PensionBee through open banking 45
5.2.8. Open banking will allow consumers to view their finances holistically 46
5.2.9. Pension providers could form partnerships with saving apps and services 46
5.2.10. NEST is to trial a pensions with an emergency fund 47
5.2.11. The next step is encouraging individuals to manage how they want their pension invested 47
6.1. Abbreviations and acronyms 48
6.2. GlobalDatas 2018 UK Life & Pensions Survey 48
6.3. Bibliography 48
6.4. Further reading 51

List of Tables
Table 1: Individual premiums APE, by product type (000s), 2013-17 15
Table 2: Trust-based premiums APE, by product type (000s), 2014-17 17
Table 3: Number of UK businesses and employees (000s), by employee band size, 2017 19
Table 4: The gap in pension savings across genders by age, 2017 32
Table 5: Top 10 UK pension providers, by pension type, 2016 37
Table 6: Number of LISA accounts, by provider, March 2018 39
Table 7: New total premiums APE, by advice type (000s), 2014-17 41

List of Figures
Figure 1: The UK population is aging, with over-65s estimated to make up 30.2% of the adult population by 2050 10
Figure 2: The state pension age is increasing 12
Figure 3: Most individuals are retired by 65, but a few still have to or choose to keep working into later life 13
Figure 4: The total pension market remained steady, falling by only 2.4% to 10.56bn APE in 2017 14
Figure 5: Auto-enrolment will drive growth of the total pensions market 18
Figure 6: Auto-enrolment staging by business size was completed in February 2018 19
Figure 7: Younger generations are the biggest winners from the introduction of auto-enrolment 20
Figure 8: Total minimum contributions will rise to 8% of band earnings in April 2019 21
Figure 9: 42.3% of those who started a pension due to auto-enrolment support increasing contribution rates 23
Figure 10: The number of pension transfers was still increasing in Q1 2018 26
Figure 11: 84.1% of UK individuals have a company pension 27
Figure 12: Individuals have numerous pension pots over their working life but then consolidate them around 55 28
Figure 13: Defined contribution pensions dominate workplace pensions among the young 29
Figure 14: Individuals lose track of how much their pension is worth over their working life 30
Figure 15: Worryingly, 41.7% of 60-65 year-olds not yet retired report having a small pension worth less than 10,000 31
Figure 16: Most individuals desire an income between 1,000 and 2,999 per month in retirement 33
Figure 17: Most individuals plan to retire at state pension age 34
Figure 18: Household income is a big determinant of when individuals plan to retire 34
Figure 19: Most contribute 2-5% of their income into their pension 35
Figure 20: Pensions are the main way to fund retirement 36
Figure 21: The independent advice channel dominates individual and work-based pensions 40
Figure 22: Only 30.4% of non-retired individuals below SPA are receiving advice about their pensions 42
Figure 23: There is a big divide in how engaged consumers are with their pensions 43
Figure 24: Aviva has partnered with Amazon Alexa to develop a pension skill 45
Figure 25: More pension providers should develop APIs for open banking 46

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