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SIPPs - UK - December 2010

ISSUES IN THE MARKET
Key issues
Market context and definitions
Figure 1: Types of private pension provision, UK
Abbreviations
FUTURE OPPORTUNITIES
Trend: Growth in DIY investing
Trend: Towards total transparency
MARKET IN BRIEF
SIPP market size
Transfer activity
Future prospects
Market drivers
Rival sectors and products
Regulatory developments
Recent market innovation
Competitive context and key players
Distribution trends
Adspend on pension products
The key findings of Mintel’s consumer research: asset ownership
Typical characteristics of the SIPP investor
Sources of investment advice
Product awareness and future consideration
INTERNAL MARKET ENVIRONMENT
Key points
The main factors influencing the market
New government, new regulatory framework
The RDR will have a positive impact on the SIPP market
Platforms – proposed ban on fund manager payments has been removed
CGT increase
Cuts in pensions tax relief will have limited impact on the SIPP market
Removing the requirement to annuitise by age 75 is welcome news
Issues affecting the wider pension industry
BROADER MARKET ENVIRONMENT
Key points
 SOCIAL TRENDS
Increasing longevity has several implications for the pensions industry
Figure 2: Life expectancy at age 50 and 65, by gender, 1981-2058 (actual and projected)
Number of higher-rate taxpayers estimated to have risen in 2010/11
Figure 3: Total number of taxpayers and number on higher rate, 1990/91-2009/10
The SIPP market could more than double in size within the next decade
Figure 4: Size of the UK adult population, segmented by value of investible assets held, August/September 2010
 MACROECONOMIC AND INVESTMENT CONDITIONS
Spending cuts and tax rises will put households under greater pressure
What impact are these factors having on the SIPP sector?
Low base rate and high inflation is not a good mix for savers
Figure 5: Average annual changes in the Bank of England base rate, CPI and RPI – UK, 2001-10
Stock market faces renewed provocation…
Figure 6: FTSE 100 and FTSE All Share – daily index movements, November 2001-November 2010
…from the Irish bailout and renewed worries over sovereign debt levels
COMPETITIVE CONTEXT
Key points
Growth in SIPP sales outpacing the broader market
Figure 7: Number of new individual pension contracts, by product type, 2005-09
SIPPs are now the largest segment within the single-premium market
Figure 8: Value of new individual pension business, by product type, 2005-09
Very limited competition from SSASs
Figure 9: Value of new EPP and SSAS business, 2005-09
MARKET SWOT ANALYSIS
Figure 10: UK SIPP market – SWOT analysis, 2010
WHO’S INNOVATING?
Key points
SIPP Milestones
Recent product development
TRADE PERSPECTIVE
About the participating companies
SIPPs are a potentially ‘mainstream’ but not ‘mass-market’ product
New products are being developed to cater for specific new audiences
New pension legislation will have positive ramifications for SIPPs
Product diversity naturally leads to varying charging structures and terminology
There is some scepticism over whether the RDR will truly remove ‘conflicts of interest’
SIPP providers are positive about the market’s outlook
The market needs to be clearly defined and uniformly regulated
MARKET SIZE AND FORECAST
Key points
A swiftly expanding market
Value of new SIPP business increases by 25% in 2010
Figure 11: Volume and value of new SIPP business, 2006-10
Mintel expects strong growth in new business to continue
Figure 12: Forecast of the number of new SIPP sales – fan chart, 2006-15
Figure 13: Forecast of the value of new SIPP premiums – fan chart, 2006-15
Figure 14: Forecast of new SIPP business, at current and constant prices, 2006-15
Forecast methodology
Fan chart explanation
MARKET SEGMENTATION
Key points
2010 sees strong demand for both non-insured and insured SIPPs
Figure 15: Value and volume of new SIPP business, segmented, by insured and non-insured business, 2008-10
Average premiums are much higher in the non-insured sector
Figure 16: Average new premium, segmented, by insured and non-insured business, 2008-10
The non-insured sector has a much higher transfer rate
Figure 17: Value of SIPP transfers and share of total single premiums, 2008-10
MARKET SHARE
Key points
A market ripe for consolidation
Most providers run SIPP administration in-house
Standard Life is the largest provider of SIPPs by value of business in force
Figure 18: Largest 12 SIPP providers, by value of in-force business, 2010 (mid-year)
Significant others
COMPANIES AND PRODUCTS
Standard Life
Company description
Position in the market
Product range
Distribution
Key data
Recent activity
Future plans
Marketing and promotion
James Hay, IPS Partnership and IFG
Company description
Position in the market
Product range
Distribution
Key data
Recent activity
Future plans
AEGON
Company description
Position in the market
Product range
Distribution
Key data
Recent activity
Future plans
Marketing and promotion
A J Bell
Company description
Position in the market
Product range
Distribution
Key data
Recent activity
Marketing and promotion
Hargreaves Lansdown
Company description
Position in the market
Product range
Distribution
Key data
Recent activity
Future plans
Suffolk Life
Company description
Position in the market
Product range
Distribution
Key data
Recent activity
BRAND COMMUNICATION AND PROMOTION
Key points
Pension providers and advisers increase their adspend
Figure 19: Total advertising expenditure on pensions and retirement income solutions, by sub-category, 2006-10
Aviva and Scottish Widows use TV advertising to enhance their brand presence
Figure 20: Top ten advertisers of pensions and retirement income solutions, 2008-10
Press and TV account for the largest share of pensions adspend
Figure 21: Proportional distribution of adspend on pensions and retirement income solutions, by media type, 2008-10
CHANNELS TO MARKET
Key points
IFAs generate the largest share of SIPP business
Figure 22: New regular-premium SIPPs, by sales channel, 2008-10
Figure 23: New single-premium SIPPs, by sales channel, 2008-10
Platform progress
VALUE OF CONSUMERS’ INVESTIBLE ASSETS
Key points
Survey background
One in five UK adults aged 21+ have investible assets of £30,000 or over
Figure 24: Value of investible assets, 2009 and 2010
Wealth increases with age until retirement
Figure 25: Value of investible assets, by age group, August/September 2010
Good scope to grow the female SIPP investor market
Figure 26: Value of investible assets, by gender and socio-economic group, August/September 2010
Higher earners have greater assets to invest
Figure 27: Value of investible assets, by gross annual household income, August/September 2010
OWNERSHIP OF SIPPS AND OTHER ASSETS
Key points
SIPPs are held by 1% of the adult population
Figure 28: Ownership of pensions and other assets, by value of assets, August/September 2010
Investor types
Figure 29: Investor types, by value of assets, August/September 2010
45-64-year-olds are most likely to have a SIPP
Figure 30: Ownership of pensions and other assets, by age, August/September 2010
Typical characteristics of the SIPP investor
Men are twice as likely as women to have a SIPP
Figure 31: Ownership of pensions and other assets, by gender and socio-economic group, August/September 2010
Investment portfolios become more diverse with income
Figure 32: Ownership of pensions and other assets, by gross annual household income, August/September 2010
SOURCES OF ADVICE AMONG THE AFFLUENT
Key points
Shift away from professional advice sources may indicate a rising trend towards DIY investment
Figure 33: Investment advice sources used, 2009 and 2010
High street bank is the top source for investment advice
Figure 34: Investment advice sources used, by value of assets, August/September 2010
THE CONSUMER – ATTITUDES TOWARDS SIPPS
Key points
Nearly half of the target audience are aware of SIPPs
Figure 35: Agreement with statements relating to SIPPs, 2009 and 2010
Awareness and interest is higher among personal pension savers
Figure 36: Agreement with statements relating to SIPPs, by ownership of personal pensions and other assets, August/September 2010
Room to improve awareness among female and younger investors
Figure 37: Agreement with statements relating to SIPPs, by gender and age group, August/September 2010
New SIPP business will overwhelmingly come from wealthy ABs
Figure 38: Agreement with statements relating to SIPPs, by socio-economic group and gross annual household income, August/September 2010
APPENDIX – PENSION OWNERSHIP
Figure 39: Pension ownership, by demographics, August/September 2010

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