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Self Invested Personal Pensions - SIPPs - UK - December 2008

ISSUES IN THE MARKET
Key issues
 MARKET BACKGROUND AND DEFINITIONS
The pensions landscape
Figure 1: Types of private pension provision in the UK
Occupational schemes
Individual pensions
Group pensions
Benefit structures
Other definitions
Abbreviations
Advertising data
INSIGHTS AND OPPORTUNITIES
A maligned sector of the market may be the key to a vibrant future
Four key sources of new seed capital for the SIPP market
Look to post-retirement as well as pre-retirement
Paying the price for past mistakes
MARKET IN BRIEF
Transfers and portfolio rationalisation drive the market
Market dominated by a handful of firms
Channels to market and advertising
The consumer – high-end products, with high-end customers
The consumer – IFAs still the key route to market
FAST FORWARD TRENDS
 TREND 1: RETHINKING BUSINESS, CAPITALISM AND CONSUMERISM
What's it about?
What we've seen
SIPPs – the self-select ethical option
 TREND 2: SUPERNANNY STATE
What's it about?
What we've seen
Going against the trend…
…and going it alone
INTERNAL MARKET ENVIRONMENT
Key points
 THE PENSIONS ENVIRONMENT
Pension provision on the decline as firms look to reduce liability
Within the occupational sector, a migration towards DC occupational pension schemes
The past provides a positive environment for SIPPs
Personal Accounts may provide further impetus for the SIPP sector
A variety of possible effects
 LEGISLATIVE ISSUES
A-day changes aimed to encourage greater pension participation
New opportunities from legislation
 REGULATORY CONSIDERATIONS
SIPP providers now fully regulated
Retail Distribution Review
Review of the suitability of SIPP and personal pensions advice
Protected rights funds made eligible for full SIPP investment
 CONSUMER FINANCIAL ACTIVITY
Savings and debt repayment top the agenda
Figure 2: Savings, investment, borrowing and debt repayment – consumers’ expected activity, June 2007-June 2008
Affluent and wealthy to increase activity levels
Figure 3: Expected financial activity, by gender, age, socio-economic group, household income and working status, March 2008 and average for the last 23 quarters
Prospects improve for life and pension providers
Figure 4: Intended life and pensions* activity, Q3/Q4 2002-Q2/Q3 2008
BROADER MARKET ENVIRONMENT
Key points
Target market begins to expand
Figure 5: Size and segmentation of the target wealth market based on investible assets, 2003 and 2008
More time being spent in retirement
Figure 6: Cohort life-expectancy at age 60, by gender, 1981-2051
Changing circumstances already demand greater focus on saving for retirement
Inflation and recession put pressure on long-term investment returns
More people likely to be working beyond retirement age
Figure 7: UK economic activity, by gender and age, 2002-10
Property wealth will increasingly be considered as a source of income in retirement
Figure 8: UK standardised average house prices (seasonally adjusted) 1995-2008
COMPETITIVE CONTEXT
Key points
SIPPs fighting competition on two fronts
The potential SIPP market is relatively clearly defined
 THE PRE-RETIREMENT SEGMENT
Non-pensions retirement-planning products
Figure 9: Ownership of savings and investments outside a pension, June 2008
Buy-to-let
Figure 10: Value and volume of buy-to-let mortgages in the UK, 2000-08
Faith in property as a pension has plummeted this year
Collective investments
Figure 11: Retail sales of unit trusts and OEICs by IMA members, 1998-2008
ISAs
Figure 12: Amounts subscribed to ISAs, by cash and stocks and shares components, 2002/03-2007/08
 THE IN-RETIREMENT SEGMENT
STRENGTHS AND WEAKNESSES IN THE MARKET
Figure 13: Self-invested personal pensions – SWOT analysis, 2008
WHO’S INNOVATING?
Key points
Technology and marketing drive innovation
Suffolk Life
Standard Life (August 2008)
AJ Bell
Hargreaves Lansdown
TRADE PERSPECTIVE
Development of the SIPP market
Industry structure and issues
Key players and their activities
Marketing and distribution developments and issues
Consumer considerations
Regulation and legislation
The future
MARKET SIZE AND FORECAST
Key points
Rapid growth in the market
Figure 14: New individual pension premiums, by product type, 2003-08
Strong market growth driven by a combination of positive factors
A golden age; but will it last?
Figure 15: Estimated impact of pension transfer business, 2008
Organic growth likely to be more important in future
Estimated £50 billion under management
Storm clouds are building
Market fragmentation is also a negative factor
e-SIPP attracting a new younger audience
Protected rights – a new impetus for the market
 FORECAST
Figure 16: Forecast of new individual APE premiums, by product type, 2003-13
Figure 17: Forecast of all new APE premiums, by product type, 2003-13
Factors used in the forecast
MARKET SHARE
Key points
Determining market share is a challenge
Figure 18: SIPP market share, by value of in-force business, September 2008
The insured SIPP sector is highly concentrated
Figure 19: Insured SIPPs market shares, September 2008
Fully invested SIPP market is increasingly competitive
Figure 20: Fully self-invested SIPP market shares, September 2008
COMPANIES AND PRODUCTS
Key points
James Hay
Standard Life
Aegon Scottish Equitable
AJ Bell
Suffolk Life
Hornbuckle Mitchell
Hargreaves Lansdown
AXA
Other SIPP providers
BRAND COMMUNICATION AND PROMOTION
Key points
Pensions advertising spend is negligible
Figure 21: Financial service media advertising, 2006/07 and 2007/08
Figure 22: Retirement planning-related advertising expenditure, by sub-category, 2003/04-2007/08
Marketing processes for SIPPs generally do not justify main media expenditure
But there are exceptions
Majority of advertising through the press
Figure 23: Retirement planning-related advertising expenditure, by media type, 2007/08
CHANNELS TO MARKET
Key points
Most pensions sold with advice
Figure 24: Sources of retirement-planning advice, June 2008
Formal advice focused on IFAs
Figure 25: New APE* premiums into individual pensions, by distribution channel, 2003-07
Banks still fringe players in the SIPP sector
Pensions advice dominated by generalist IFAs
Figure 26: Leading pensions IFAs, 2008 (based on 2007 income)
THE CONSUMER – SIPPS AND ATTITUDES TOWARDS SAVING
Key points
SIPPs very much a minority product despite strong market growth
Figure 27: Ownership of pension products, by type, June 2008
Comparing and contrasting characteristics of personal pension holders highlights SIPP investor profile
Figure 28: Ownership of selected pension products, by gender, age, socio-economic group and marital status, June 2008
Older, more affluent consumers confirmed as key market for SIPPs
Figure 29: Ownership of selected pension products, by lifestage, Mintel’s Special Groups, working status, income and housing tenure, June 2008
Technology usage a key identifier of SIPP ownership
Figure 30: Ownership of selected pension products, by TV region, technology usage, newspaper readership and education level achieved, June 2008
Implications
The value of existing pension funds may provide a clue to the market potential
Figure 31: Value of pension holdings, June 2008
Some mainstream potential
Figure 32: Value of pension holdings above £50,000, by gender, age, socio-economic group and marital status, June 2008
Figure 33: Value of pension holdings above £50,000, by lifestage, household income and housing tenure, June 2008
Londoners top pension charts
Figure 34: Value of pension holdings above £50,000, by region, ACORN group, technology usage, internet usage, newspaper readership and education level, June 2008
Drift to younger consumers exaggerated?
Property losing its gloss – but where is safe?
Figure 35: Preferred investment choices, June 2008
Figure 36: Investment choices, by gender, age, socio-economic group and marital status, June 2008
Greater interest in equities among key SIPPs targets
Figure 37: Investment choices, by lifestage, Mintel’s Special Groups, working status, household income and housing tenure, June 2008
Even the Wealthy Achievers and Prosperous Urbanites shun equities
Figure 38: Investment choices, by TV region and ACORN group, June 2008
No instant answers – but some reassurance
THE CONSUMER – ADVICE AND THE SIPPS MARKET
Key points
Attitudes towards SIPPs
Figure 39: Attitudes towards SIPPs, June 2008
Apathy about pensions is still the dominant attitude
Figure 40: Key attitudes towards SIPPs, by gender, age and socio-economic group, June 2008
Lifestage and household income are key determinants of attitudes towards SIPPs
Figure 41: Key attitudes towards SIPPs, by lifestage, Mintel’s Special Groups, household income and TV region, June 2008
A new market being opened up?
Nurturing the next generation
SIPPs face strong competition from non-pension saving
Figure 42: Selected savings and investment products, by gender, age, socio-economic group and marital status, June 2008
Implications
Consolidating holdings in retirement
Figure 43: Selected savings and investment products, by lifestage, Mintel’s Special Groups, household income and housing tenure, June 2008
Consolidation, not accumulation?
Figure 44: Selected savings and investment products, by region, ACORN group, technology users and internet usage, June 2008
Implications
Pensions matters generally involve a range of advice sources
Figure 45: Sources of advice on pensions and investment matters, June 2008
Use of formal sources of advice increases with age and socio-economic status
Figure 46: Sources of advice on pensions and investment matters, by gender, age and socio-economic group, June 2008
Third age and married consumers most likely to consult widely on pensions
Figure 47: Sources of advice on pensions and investment matters, by marital status and lifestage, June 2008
Peaks in seeking advice relate to more affluent consumers and those in the family group
Figure 48: Sources of advice on pensions and investment matters, by lifestage, working status, household income and housing tenure, June 2008
Wealthy Achievers and consumers in South consult on pensions
Figure 49: Sources of advice on pensions and investment matters, by TV region and ACORN group, June 2008
Web likely to prove a crucial medium for SIPPs
Figure 50: Sources of advice on pensions and investment matters, by technology and internet usage, June 2008
Implications
THE CONSUMER – FURTHER ANALYSIS AND TARGET GROUPS
Key points
Complete control appeals to a tenth of the population
Figure 51: SIPP market target groups, June 2008
Figure 52: Attitudes towards SIPPs, by target group, June 2008
Group One: Trust in the experts
Figure 53: Percentage difference to the average for Trust in the experts’ selected defining statements compared with other groups, June 2008
Who are they?
Group Two: Simple and Straightforward
Figure 54: Percentage difference to the average for Simple and Straightforward’s selected defining statements compared with other groups, June 2008
Who are they?
Group Two: Compete control
Figure 55: Percentage difference to the average for Complete control’s selected defining statements compared with other groups
Who are they?
Group Four: Disinterested
Figure 56: Percentage difference to the average for Disinterested selected defining statements compared with other groups
Who are they?
Complete control seek the widest source of advice
Figure 57: Sources of advice used for investment and/rpenison deicisions, June 2008
APPENDIX – TARGET GROUP DEMOGRAPHICS
Figure 58: Target group demographics, June 2008

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