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SIPPs - UK - December 2011

INTRODUCTION
Abbreviations
Definitions
EXECUTIVE SUMMARY
The market
The SIPPs market can overcome minor bumps in the road
Figure 1: SIPPs value forecast, by new premium sales, 2006-16
Market factors
The pensions market is facing some challenging times
Figure 2: Life expectancy at age 50 and 65, by gender, 1981-2058 (actual and projected)
Market share
Figure 3: Top SIPP providers, by value of in-force business, September 2011
The consumer
Savings and Investment values
Figure 4: Value of savings and investments, July 2011
Financial advice usage
Figure 5: Financial advice, July 2011
Money management
Figure 6: Money management, July 2011
SIPP recognition is not widespread
Figure 7: SIPP Recognition, July 2011
Pension investment control
Figure 8: Pension investment control, July 2011
Preferences in financial management company attributes
Figure 9: Preferences in financial management company attributes, July 2011
What we think
ISSUES IN THE MARKET
How will changes to tax relief impact on SIPPs?
Can the SIPPs market continue to flourish?
What impact will fees have on SIPPs?
How big an influence will other factors besides supplier control have?
Will flexible drawdown increase SIPP business levels?
FUTURE OPPORTUNITIES
Turbulent financial times make flexibility an important feature
Taking the long-term, cautious view could pay dividends when it comes to pensions
INTERNAL MARKET ENVIRONMENT
Key points
What are the main growth drivers of SIPPs?
Lower income groups looking to SIPPs
Global debt crisis impacting on SIPPs funds
How will the RDR impact on SIPPs?
FSA Platform Policy Paper – SIPP platform changes
Low interest rates putting the squeeze on SIPP providers
Changing pension landscape
Government impact on pension savings
Government intervention is the greatest threat to the pensions industry
Supplier consolidation could see smaller firms priced out of the market
Junior SIPPs
Esoteric assets to cause problems for SIPPs providers
Flexible drawdown forms around one fifth of the SIPPs market
BROADER MARKET ENVIRONMENT
Key points
People are living for longer than ever before – disaster for the pensions industry unless the retirement age is increased
Figure 10: Life expectancy at age 50 and 65, by gender, 1981-2058 (actual and projected)
Higher-rate taxpayer numbers growing – this is good news for SIPPs providers
Figure 11: Total number of taxpayers and number on higher rate, 1990/91-2011/12
Women are set to face a retirement on a very tight budget
Frozen salaries and rising cost of living puts a squeeze on savings
The eurozone crisis is doing nothing to help calm investment fears
Stock markets remain turbulent
Figure 12: FTSE 100 and FTSE All Share – daily index movements, September 2001-September 2011
Savers facing a challenging environment
Figure 13: Average annual changes in the Bank of England base rate, CPI and RPI – UK, 2001-10
Pensions deficit
COMPETITIVE CONTEXT
Key points
SIPPs proving to be the most popular personal pension option
Figure 14: Number of new individual pension contracts, by product type, 2005-10
SIPPs see good growth in the new single premium market
Figure 15: Value of new individual pension business, by product type, 2005-10
SSASs’ competitive position relative to SIPPs diminishing
Figure 16: Value of new EPP and SSAS business, 2005-10
STRENGTHS AND WEAKNESSES IN THE MARKET
Figure 17: SWOT Analysis
WHO’S INNOVATING?
Key points
Corporate Wrap from Hargreaves Lansdown alternative to company pensions
Deposit account offering from Leeds Building Society
Torquil Clark offer ‘TQ Active Money’ service
Flexible drawdown option from Axa
Pointon York offers SIPPs compliant with Sharia laws to attract British Muslim investors
No annual management charge SIPP from JPJShare.com
LV= partnership with Barclays Stockbrokers allows greater market access
Phased drawdown from Aviva
Carbon-neutral SIPP from Pointon York
MARKET SIZE AND FORECAST
Key points
SIPP market continues to expand
Volume of SIPP business on the increase but volume levels fall
Figure 18: Volume and value of new SIPP business, 2006-11
Mintel forecasts tempered growth in the SIPP market
Figure 19: SIPPs value market forecast, by new premium sales, 2006-16
Forecast methodology
MARKET SEGMENTATION
Key points
Non-insured market is seeing the insured sector through a tough year
Figure 20: Value and volume of new SIPP business, segmented, by insured and non-insured business, 2008-11
Average insured premium levels coming into line with average non-insured
Figure 21: Average new premium, segmented, by insured and non-insured business, 2008-11
Transfer rates similar in insured and non-insured sectors
Figure 22: Value of SIPP transfers and share of total single premiums, 2008-11
MARKET SHARE
Key points
Market Ccnsolidation
Outsourcing of SIPP administration growing
Standard Life retains position as largest SIPP provider
Figure 23: Largest 12 SIPP providers, by value of in-force business, 2011 (mid-year)
COMPANIES AND PRODUCTS
Standard Life
Figure 24: Key financial data for Standard Life UK, H1 2010-H1 2011
James Hay Partnership
Figure 25: Key financial data for James Hay Holdings Ltd, 2009-10
AEGON UK
Figure 26: Key financial data for AEGON UK plc, 2009-10
A J Bell
Figure 27: Key financial data for AJ Bell Holdings Ltd, H1 2010-H1 2011
Hargreaves Lansdown
Figure 28: Key financial data for Hargreaves Lansdown plc Group, 2010-11
Suffolk Life
Figure 29: Key financial data for Suffolk Life Pensions, 2009-10
CHANNELS TO MARKET
Key points
Regular premium SIPP sales up in all channels but intermediaries are still top
Figure 30: New regular-premium SIPPs, by sales channel, 2008-10
IFAs sell the majority of new single premium SIPPs
Figure 31: New single-premium SIPPs, by sales channel, 2008-10
Changes to SIPP platforms necessary to see the industry through the RDR
BRAND COMMUNICATION AND PROMOTION
Key points
Changes in the pensions advertising landscape
Figure 32: Total advertising expenditure on pensions and retirement income solutions, by sub-category, 2007-11
Aviva tops the advertising spending charts
Figure 33: Top ten advertisers of pensions and retirement income solutions, 2009-11
Internet and press advertising on the increase in 2011
Figure 34: Proportional distribution of adspend on pensions and retirement income solutions, by media type, 2009-11
INVESTMENT AND ASSET OWNERSHIP
Key points
15% of people have at least £50,000 in investible assets
Figure 35: Value of savings and investments, July 2011
Some 4% of affluent investors already have a SIPP
Figure 36: Pension and investment asset ownership among affluent consumers, July 2011
SIPP ownership highest amongst those with £250,000 or more to invest
Figure 37: Pension and investment asset ownership among affluent consumers, by value of savings and investments, July 2011
FINANCIAL ADVICE
Key points
High street banks and IFAs are the most popular destinations for those looking for financial advice
Figure 38: Financial advice, July 2011
Those with less to invest are more likely to take a DIY approach to financial advice
Figure 39: Financial advice, by value of savings and investments, July 2011
Personal decision making the most popular form of money management
Figure 40: Money management, July 2011
SIPP AWARENESS
Key points
Less than half of affluent people have heard of SIPPs
Figure 41: SIPP recognition, July 2011
SIPP recognition higher among men
Figure 42: SIPP recognition, by gender, July 2011
Young people have lower SIPP awareness
Figure 43: SIPP recognition, by age, July 2011
ABs have greater SIPP recognition levels than other socio-economic groups
Figure 44: SIPP recognition, by socio-economic group, July 2011
SIPP awareness is relatively constant across investible asset value
Figure 45: SIPP recognition, by value of savings and investments, July 2011
Those who use the press for advice have the highest level of SIPP awareness
Figure 46: SIPP recognition, by financial advice, July 2011
SIPP recognition higher with those who occasionally consult financial advisors
Figure 47: SIPP recognition, by money management, July 2011
PENSION INVESTMENT CONTROL
Key points
24% of respondents feel that they don’t need a lot of control over their pensions
Figure 48: Taking control of pension investments, July 2011
Those with more to invest have a greater confidence in picking their own investments
Figure 49: Taking control of pension investments, by value of savings and investments, July 2011
Personal and stakeholder pension owners are interested in pension consolidation
Figure 50: Taking control of pension investments, by most popular asset ownership, July 2011
Those using press and the internet for financial advice don’t feel the need for a high level of pension control
Figure 51: Taking control of pension investments, by financial advice, July 2011
Interest in pension consolidation higher with those who take professional financial advice
Figure 52: Taking control of pension investments, by money management, July 2011
SIPP awareness higher amongst those who don’t want that level of control over their pensions
Figure 53: Taking control of pension investments, by SIPP recognition, July 2011
Pension investment control by demographics
Figure 54: Pension investment control, by demographics, July 2011
PREFERENCES IN COMPANY ATTRIBUTES
Key points
Well-informed staff tops the list of preferred finance company attributes
Figure 55: Financial management company choice, July 2011
Access to financial advice a key attraction for those with less to invest
Figure 56: Financial management company choice, by value of savings and investments, July 2011
Personal and stakeholder pension owners want flexibility and understanding from their financial services provider
Figure 57: Financial management company choice, by most popular asset ownership, by July 2011
Respondents who use their bank and IFAs for advice value knowledgeable staff
Figure 58: Financial management company choice, by financial advice, July 2011
Occasional users of professional advice want their financial position to be understood
Figure 59: Financial management company choice, by money management, July 2011
Respondents with higher levels of SIPP awareness look for accessible named contacts from their financial managers
Figure 60: Financial management company choice, by SIPP recognition, July 2011
APPENDIX – MARKET SIZE AND FORECAST
SIPP Value
Figure 61: SIPP market value, by new premiums, 2011-16
APPENDIX – INVESTMENT AND ASSET OWNERSHIP
Figure 62: Most popular value of savings and investments, by demographics, July 2011
Figure 63: Next most popular value of savings and investments, by demographics, July 2011
Figure 64: Most popular asset ownership, by demographics, July 2011
Figure 65: Next most popular asset ownership, by demographics, July 2011
APPENDIX – FINANCIAL ADVICE
Figure 66: Financial advice, by demographics, July 2011
APPENDIX – SIPP AWARENESS
Figure 67: SIPP recognition, July 2011
APPENDIX – PENSION INVESTMENT CONTROL
Figure 68: Taking control of pension investments, July 2011
APPENDIX – PREFERENCES IN COMPANY ATTRIBUTES
Figure 69: Most popular financial management company choice, July 2011
Figure 70: Next most popular financial management company choice, July 2011
Figure 71: Other financial management company choice, July 2011

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