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UK Individual Pensions 2007
Market Report, August 2007, 3596  €


Description

IntroductionCovers the UK individual pension market between 2002 and 2006, offering analysis of key trends and drivers.
The market is forecast to 2011 to aid strategic planning during a period of huge upheaval in the market.ScopeThe report covers the individual pensions market, focusing on Personal Pensions, Stakeholder and SIPPs.
Extensive in-depth interviews were conducted with leading players in the market to ascertain the key concerns and prediction's for the coming years.
Datamonitor's qualitative and quantitative forecasts for the individual pensions market, in light of significant industry changes.HighlightsThe SIPP market has undergone substantial growth in recent years, with many investors enticed by the increased flexibility, tax-efficiency and self-investment feature of a SIPP product.
This is reflected by the number of providers currently offering SIPP products in the market, as well as those that are shifting their attention to SIPPs.
The potential for personal accounts to induce people to consider long-term savings plans is evident and its threat to the individual personal pensions market is also evident, in that it will be introduced as a compulsory scheme that may force investors to abandon their traditional individual pension in favour of a state-led scheme.
Online distribution continues to be an area of interest within the individual pensions market, with many life companies pouring resources into online offerings that, while not necessarily giving investors an all-inclusive online experience, nonetheless grants them access to a plethora of analytical tools and market guides.Reasons to PurchaseOffers unique insight from experts in all areas of the market regarding legislative and regulatory changes that are driving the market.
Provides details of growth in the individual pensions market between 2002 and 2006 and offers analysis into developments such as personal accounts.
Forecasts the individual pension market to 2011, covering a period of transition, with the emergence of personal accounts and SIPP development.

Sommaire
 
Overview 1
Catalyst 1
Summary 1
Executive Summary 2
Market Focus 2
Competitor Focus 2
Distribution Dynamics 2
Table of Contents 4
Table of figures 5
Table of tables 6
MArket Focus 7
Personal pensions dominate the market in terms of new business 7
Single premium individual pensions new business grew by 12% per year between 2002-2006 7
SIPP new business grew at a compound annual rate of 161% between 2002-2006 8
Despite the dominance of personal pensions, SIPPs have experienced the most impressive year-on-year growth over the last five years 8
There are three key products in the individual pensions market 9
SIPPs have received the most recent attention 10
Appropriate segmentation and targeting of SIPPs can boost take-up and retention 11
SIPP regulation and the proposed introduction of personal accounts are the current key market issues 12
Personal accounts are being heralded as the way forward for the low-end of the market 12
The potential of personal accounts are somewhat undermined by the costs of the scheme 12
Personal accounts may put pressure for amendments to be made to trivial commutation regulations 13
A contributions ceiling with regard to personal accounts may be necessary to ensure existing pension provision is not weakened 13
There are currently many alternatives to pension saving, the choice of which is dependent on investor attitude and preferences 13
SIPP regulation was finally introduced in April 2007 15
Amendments have been made to regulation and providers have been given more time with key features documents 16
SIPPs are giving providers access to private companies 16
Most investors opt for default funds out of all fund choices 17
Default funds are a convenient choice, but do not necessarily represent the most effective or appropriate fund allocation 17
Providing an extensive number of funds is not necessarily optimum and investors should be given a strong, narrow fund range to choose from 18
There has been little in the way of regulatory change throughout the individual pensions market 19
Many SIPP providers are blocking transfers of stocks & shares into pensions following increased scrutiny from HM Revenue & Customs 19
The HMRC has clarified rules regarding ``in-specie`` contributions 19
One possible solution to the complications of the HMRC lies with ``Bed-and-Sipping`` 20
The Department of Work & Pensions plans to remove rules currently in place that serve to limit investment choice 20
The market will become increasingly shaped by SIPP products, leaving the future of stakeholder and personal pensions in doubt 21
Single premium SIPP new business is expected to grow at a compound annual rate of 14% over the next five years 21
SIPPs will account for just under half of regular premium individual pension new business by 2011 22
A definition for SIPPs, outlining its core principles and features, is necessary to ensure that insurance companies don't sell an incorrectly defined product 22
Hybrid SIPPs have the potential to become a popular product in the market 23
The emergence of Group SIPPs must be approached with caution 24
The SIPP market is expected to grow at an exponential rate and further encroach on personal pension business 25
The effectiveness of personal accounts is uncertain, as the market continues to polarize between stakeholder and SIPP pensions 25
But that does not necessarily signal an end for personal pensions and stakeholder offerings 26
A holistic retirement planning program will become integral to the future wellbeing of the UK pensions market 27
Combining variable annuities with a SIPP product will give investors an ideal balance for their retirement strategy 28
The future of SIPPs lie in their distribution via an efficient platform 28
Data 29
Competitor Focus 32
Lloyds TSB dominate the pensions market in terms of market share 32
Lloyds TSB currently head the group of leading single premium pensions providers in 2006, but Prudential came out on top in 2005 32
Aviva head the group of leading regular premium pensions providers in 2006 but Lloyds TSB came out on top in 2005 33
Most competitors are focusing their efforts on stakeholder and SIPP offerings 33
Life Companies tend to offer stakeholder and personal pension plans 33
The Legal & General offering is focused on stakeholder and annuity pensions 33
Scottish Widows offer stakeholder and personal pension plans, as well as a range of online tools 34
Online SIPPs are an area that has received significant attention from individual pensions providers 35
SIPPDeal are one of the few providers of online SIPPs in the market 35
Several non-life companies have begun offering SIPP products 35
Hargeaves Lansdown was considered the best SIPP provider by What Investment magazine in 2007 35
Fidelity incorporate SIPPs into a special Fidelity Retirement Fund 36
The Baillie Gifford Select Pension SIPP is provided in alliance with Alliance Trust Savings 36
There has been little in the way of product innovation within the individual pensions market 37
Most changes have centered on tweaks to the core features of the product, rather than development of market-altering strategies 37
The individual pensions market is characterized by few partnerships 37
AXA have recently acquired the Thinc financial advisory group 37
That aside, there has been little in the way of strategic partnerships within the individual pensions market 38
Data 39
Distribution Dynamics 41
IFAs are the most effective means of distributing individual pension products 41
But SIPP commissions and charges need to be clean and transparent, moving away from commission to a fee-based structure 41
Online distribution remains a promising area in the individual pensions market 42
The FSA is concerned about churning with regard to SIPP investments 42
The FSA's retail distribution review is the focal point of distribution regulation 42
The FSA's review of retail distribution has been the main point of discussion regarding distribution regulation 42
The FSA proposes to split the market for regulated investment advice into two parts 43
The FSA want remuneration to be provided on a fee basis but this is still an issue very much in transition 43
Sesame tops the list of the biggest distributors of pensions services in 2006 44
APPENDIX 46
Definitions 46
Single premium policy 46
Regular premium 46
New business 46
Life based savings products 46
In-specie contribution 46
Pension product definitions 46
Personal Pensions 46
Stakeholder Pensions 46
Group personal pensions 47
DSS Rebates 47
Employer Sponsored Stakeholder pension (ESS) 47
SIPPs (Self Invested Personal Pensions) 47
ABI definitions of distribution channels 47
Independent Financial Advisors (IFAs) 47
Direct sales forces 47
Tied agents 47
Multi-tied agents 47
Bancassurance 48
Direct marketing 48
Other 48
Further reading 48
Ask the analyst 48
Datamonitor consulting 48
Disclaimer 48
List of Tables
Table 1: Single premium pensions new business, £m APE, 2002-2006 29
Table 2: Regular premium pensions new business, £m APE, 2002-2006 29
Table 3: Forecast single premium pensions new business, £m APE, 2007-2011 30
Table 4: Forecast regular premium pensions new business, £m APE, 2007-2011 30
Table 5: Amount of new business attributed to SIPPs, segmented by SIPP type, £m, 2006 31
Table 6: Single premium pensions new business for the top ten life companies, £m APE, 2002-2006 39
Table 7: Regular premium pensions new business for the top ten life companies, £m APE, 2002-2006 40
Table 8: Top IFAs by total turnover and percentage of pension turnover, £m, 2006 45
Table 9: Top IFAs according to pensions turnover, £m, 2006 45
List of Figures
Figure 1: Personal pensions make up just over half of individual pensions new business in 2006 7
Figure 2: Personal pensions make up approximately half of regular premium individual pension new business in 2006 8
Figure 3: SIPP new business is forecast to overtake that of personal pensions by 2010 21
Figure 4: Personal pensions will dominate regular premium new business until 2011 22
Figure 5: Full SIPPs are the most popular SIPP product in terms of new business in 2006 24
Figure 6: The market for single premium pensions is currently dominated by Lloyds TSB in 2006 32
Figure 7: The market for regular premium pensions is dominated by Aviva in 2006 33
Figure 8: Sesame is the largest IFA in terms of annual pension turnover in 2006 44
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