Product Type: Market Research Report
Published by: Mintel International Group Ltd.
Published: April 2008
Product Code: R560-3258Description Encouraging more people to make provision for their own retirement is a primary aim of the UK government. Reform after reform has centred on restoring consumer faith in the pensions industry and boosting take-up of pensions, albeit with varying degrees of success. Examples include the launch of stakeholder pensions in April 2001, and a new simplified pensions tax regime in April 2006.
Further monumental change is but a few years away, with the launch of a new national pension savings scheme (NPSS). The introduction of personal accounts in 2012 will dramatically alter the UK pensions landscape. While many feel it is a move in the right direction, there are numerous concerns and practicalities to work out. Pension companies question how the scheme can be administered effectively within proposed pricing limitations, while employers are anxious about the added cost burden.
This report will examine the arguments for and against the NPSS, and explore the issues surrounding it, by drawing on the expert views of pension providers, as well as the opinions of those who will likely be enrolled in the scheme. We investigate the reasons why more than half of the UK’s working population is not currently saving in a pension; and identify and profile the target market for personal accounts. We also assess the level of consumer support for the proposed scheme and the process of auto-enrolment.
Mintel asks:- What are personal accounts?
- Why does the government want to introduce them?
- Who is the target audience for the NPSS?
- What do these people think of the scheme?
- What proportion of NPSS targets is likely to opt out of the scheme, and why?
- What do pension providers and employers think of the government’s proposals? What are the main bones of contention?
Table of Contents - ISSUES IN THE MARKET
- Mintel asks
- Key issues
- Market definitions
- Figure 1: Types of private pension provision in the UK
- Occupational schemes
- Individual pensions
- Benefit structures
- Abbreviations
- MARKET IN BRIEF
- Radical new plans proposed
- So who are the proposals aimed at?
- Impetus for the reforms
- For and against
- Figure 2: Positive and negative implications of the NPSS
- Financial impact on SMEs
- So what do consumers think of the plans?
- Reasons for opting out
- BROADER MARKET ENVIRONMENT
- Key points
- The demographic time bomb
- The longevity risk
- Figure 3: Cohort life expectancy at age 60, by gender, 1981-2054
- Old age dependency ratio forecast to rise to 45% by 2044
- Figure 4: Projected size of the UK population, by age band, 2007-44
- Job mobility has increased, while job stability has lessened
- Greater onus on saving on the run up to the scheme’s introduction
- Figure 5: Total personal disposable income (PDI), consumer expenditure and savings, 2003-12
- INTERNAL MARKET ENVIRONMENT
- Key points
- Employer support for pensions has declined
- Figure 6: Trends in occupational scheme coverage, by gender and working status, 1989-2006
- Affordability is top reason for lack of pension savings
- Figure 7: Reasons for not saving in a pension, November 2006
- Cost matters
- Past mistakes still undermine trust in the industry
- Constant change weakens confidence
- Apathy reigns
- Some employees shun the company scheme
- People are most likely to equate pensions with ‘a comfortable retirement’
- Figure 8: Words and phrases associated with pensions, by pension members and NPSS targets, December 2007
- SCHEME OUTLINE
- Key points
- So what’s proposed?
- Measures to support existing arrangements
- Qualifying schemes
- Delivered in three stages
- Positive ramifications
- Points of contention
- What pension providers have said about the scheme
- COUNTING THE COSTS
- Key points
- 1.2 million private-sector employers in the UK
- Figure 9: Number of private-sector enterprises, employees and turnover - UK, by size band, 2006
- The financial impact - smallest firms will be hit the hardest
- Figure 10: Estimated costs for small firms at 2007/08 prices
- Dispute over the ‘real’ cost to employers
- The money has to come from somewhere
- Auto-enrolment: suitable for all?
- PADA consult on the charging structure
- STRENGTHS AND WEAKNESSES
- Figure 11: The pensions industry and personal accounts - SWOT analysis, 2008
- THE SIZE OF THE TARGET MARKET
- Key points
- Potentially 9 million enrolled
- Figure 12: The size of the NPSS target market, 2007 and 2012
- Exemptions
- PROFILE OF THE TARGET MARKET
- Key points
- Two thirds of the target group are aged 22-44
- Figure 13: Penetration and profile of NPSS targets, by gender, age, socio-economic group, lifestage and marital stage, December 2007
- Most NPSS targets are in the low-to-mid income range
- Figure 14: Penetration and profile of NPSS targets, by tenure, working status, household income, ACORN category and region, December 2007
- More than two thirds of the target audience are Internet users
- Figure 15: Penetration and profile of NPSS targets, by new technology usage, newspaper readership, commercial TV viewing and supermarket usage December 2007
- COMPETITIVE CONTEXT
- Key points
- OCCUPATIONAL PENSION SCHEMES
- Private-sector schemes in decline
- Figure 16: Number of occupational pension schemes in the UK, by sector, 2000, 2004 and 2006
- Data illustrate reduced employer support for pensions
- Participation in context
- DC schemes far outnumber DB
- Figure 17: Number of open and closed private-sector single-section schemes, by benefit structure and size band, 2006
- Multi-section schemes
- Active membership in the private sector has steadily fallen
- Figure 18: Number of occupational scheme members, by sector, 1991, 1995, 2000, 2004 and 2006
- Two thirds of private-sector members are men
- Figure 19: Proportion of active members, by gender and sector, 2006
- CURRENT FRAMEWORK FOR WORKPLACE PENSIONS
- Figure 20: Types of workplace pension, 2007
- Size of the insurance-administered sector
- Figure 21: Insurance-administered occupational and individual pension business in force, by product type, 2003-06
- THE MAIN PENSION PROVIDERS
- Key points
- Impact on the pensions industry
- Current competitive environment
- Standard Life topped the pension provider rankings in 2006
- Figure 22: Top ten pensions providers by APE, 2006
- ADVICE SOURCES AND PRODUCT DELIVERY
- Key points
- Intermediaries dominate the sale of insurance-administered schemes
- In-house run schemes also make use of advisers
- Non-pension members are more likely to trust friends and family than an IFA to give them good pensions advice
- Figure 23: Most trusted sources of pensions advice, December 2007
- THE CONSUMER - PENSION PARTICIPATION
- Key points
- About Mintel’s consumer survey
- Less than half of all non-retired adults are contributing to a pension…
- Figure 24: Proportion of adults who are active members of a pension, by type, December 2007
- …and this proportion appears to have declined
- Figure 25: Proportion of adults who are active members of a pension, by type, April 2006 and December 2007
- Gender gap has narrowed
- Figure 26: Pension ownership by gender, age, socio-economic group and working status, December 2007
- APPENDIX: RESEARCH METHODOLOGY
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