Introduction and Abbreviations
Global information and research
Definitions
Consumer research
Abbreviations

Executive Summary
The Government acts to reduce the burden of state pension funding
Further action is needed to reduce the savings gap
Insurers calling on the Government to increase the state retirement age
Changing lifestyles and work patterns are driving product innovation
Those aged 45+ tend to be able to increase pension contributions
Recently retired pensioners show a greater reliance on self-provision
Figure 1: Proportion of weekly gross income by type of income, all pensioners, 2000/01
Low annuity rates are prompting consumers to look at alternatives
The grey consumer
Self-provision will become increasingly important going forward

Background
Defining the grey market
Ages 45-54
Ages 55-64, the retiring years
Ages 65+, post-retirement
The UK pension system
Figure 2: Structure of the UK pension system, 2002
Reforming the pension system
The new Pension Credit aims to make saving more attractive to low and moderate earners
Stakeholder pensions appeal to a wider range of people...
...but further reforms are needed to encourage people to save more
Figure 3: Savings needed for a pension of £10,000 a year in real terms, May 2002
Figure 4: Projected weekly retirement income at the age of 65 should a person invest £81 per
month in a stakeholder pension, by gender and starting age, April 2002
Raising the state pension age could ease the burden on pension funding
Annuities rules have been criticised for being too inflexible
The inheritance tax threshold is not keeping pace with rising house prices

Market Factors
Changing work and social patterns call for more flexible pension arrangements
Figure 5: Projections of households, by type in England, 1981-2016
Longer life expectancy means pension funds have to stretch further
Figure 6: Expectation of life at age 50 in the UK, by gender, 1971-2040
Age structure of the working population
Figure 7: Composition of the employed population, by age group and gender, Spring Quarter 2001
Employment rates increasing for the over 50s
Figure 8: Employment rates for adults aged 50+, by gender and age group, Spring Quarter, 1993-2001
Twice as many women as men over state retirement age are in employment
Economic activity rates for the over-50s more volatile
Figure 9: Economic activity rates for adults aged 50+, by gender, Spring Quarter, 1993-2001
Average earnings peak around the age of 45
Figure 10: Average gross annual and weekly earnings and distribution of weekly pay for full-timemployees in Great Britain, April 2001
Income levels vary according to gender and type of work
Figure 11: Average gross annual and weekly earnings for full-time employees in Great Britain, bgender and type of work, April 2001
Household income tends to decline from the age of 55
Figure 12: Annual household income, by age group, 2001
Inheritance often boosts the over-45s level of wealth...
...while rising house prices have also increased grey market affluence
Figure 13: Age of head of household by tenure, England, 2000/01

Market Size
The size of the grey market
Figure 14: Population aged 45 and over in the UK, by age group, 1991-2006
Adults aged 45+ as a proportion of all adults
Figure 15: Adults aged 45+ as a proportion of all adults, 1991-2006
There are more women than men over the age of 44
Figure 16: Population of men and women aged 45 and over in the UK, 1991-2006

Retirement Planning, Provision and Products
Some 98% of pensioners are in receipt of state retirement income
Figure 17: Proportion of pensioner units in receipt of selected sources income, 2000/01
Pensioners are increasingly relying on self-provision for their income
Figure 18: The average incomes of all pensioners and pensioners recently retired, constant 2000/01 prices, by source, 1994/95-2000/01
Almost one in four pensioner households have savings valued at £20,000 or more
Figure 19: Proportion of pensioner households with savings, Great Britain, by amount, 2000/01
Ownership of selected saving and investment products among the 45+ age population
Figure 20: Proportion of households with selected savings/investments, by type and age of hea2000/01
The grey market is the principal segment for providers of savings and investment products
Figure 21: Total new business, by value and volume, and the proportion of contracts held by the
45+ population, by product type, 2001
Expenditure on personal pensions is highest among the 50-74 age group
Figure 22: Annual expenditure on, and penetration of, personal pensions, by age group, 1999/2000
An increasing number of people are investing in bricks and mortar to boost their retirementincome
Home equity release plans can provide a further source of income for pensioners
Trust funds can reduce inheritance tax liabilities
Long-term care insurance remains a niche market
Figure 23: Lifetime risk of admission to permanent residential/nursing home care, by age and gender, 1997
The over-45s are most likely to seek investment advice from banks, building societies and IFAs
Figure 24: Preferred sources for investment information and advice, by age group, April 2002

The Consumer
Some 13% of 45-54-year-olds think retirement is too far away for it to be of concern to the now
Figure 25: Percentage of respondents who agree verses those that do not agree that retiremenis a long way away for them to worry about it now, by age group, April 2002
ABs most likely to be concerned about their retirement
Figure 26: Percentage of respondents who agree verses those that do not agree that retiremenis a long way away for them to worry about it now, by socio-economic group, April 2002
One in four people aged 45+ have no private provision
Figure 27: Ownership of pension or retirement-related products, by age group, April 2002
Single people, C2DEs and those currently not working are least likely to have a pension or
other retirement provision
Figure 28: Ownership of pension or retirement-related products among the 45+ age group, by
socio-economic and demographic group, April 2002
Four out of five greys think that state benefits will not be enough to provide for a comfortabstandard of living at retirement
Figure 29: Proportion of over-45s who agree/disagree that state benefits alone will be enough tprovide for a comfortable retirement, by age, gender, socio-economic group and current retirement provision, April 2002
Two in three greys say they need an annual retirement income of £15,000 or more for a comfortable standard of living
Figure 30: Desired pension per annum for a comfortable retirement at current prices, by age group, April 2002
ABC1s, couples and high-earners tend to want a higher retirement income than C2DEs,
single people and low-to-medium earners
Figure 31: Desired pension per annum for a comfortable retirement at current prices, by socio-economic and demographic group, April 2002
Just over a quarter of the 45+ age group are able to save £100 or more a month for their retirement
Figure 32: Average amount saved/could save in a pension and/or other savings product per month among the 45+ age group, April 2002
Men, ABC1s, couples and higher earners are most able to save at least £100 a month for their retirement
Figure 33: Average amount could/do save in a pension and/or other savings product per month
among the 45+ age group, by socio-economic or demographic group, April 2002
Around half of the over-45s think they have sufficient financial provision for a comfortable retirement
Figure 34: Proportion of respondents aged 45+ who think they have verses those who think the
have not sufficient financial provision for a comfortable retirement, by gender, April 2002
The more people save each month the more confident they are of having sufficient retirement provision
Figure 35: Proportion of respondents aged 45+ who have sufficient financial provision for a
comfortable retirement verses those who have not, by amount able to save per month, April 200
Some 45% of grey consumers regret not saving more for their retirement
Figure 36: Proportion of 45+ age group who regret not saving more money in the past for their retirement verses those who do not, by age, gender, socio-economic group and current retirement provision, April 2002
Nearly two thirds of people aged 45+ would make additional savings to boost their retirement income
Figure 37: Proportion of respondents aged 45+ who would verses those who would not considemaking additional payments/savings to boost their income at retirement, by gender and socio-economic group, April 2002
Financial security is the primary factor driving people to save
Figure 38: Main factors which would encourage people aged 45+ to save or invest more moneyfor their retirement, ranked in order of importance, April 2002
Identifying specific target groups
Figure 39: Level of retirement provision, by age, gender, socio-economic and demographic group, Apr-02

The Future
The number of people able to retire early is set to decline
Urgent need for many greys to save more for their retirement
The growing popularity of money-purchase occupational pensions could mean lower
contribution rates
Increasing use of alternative investments to boost pensions
The 45+ age group will continue to be the key market for savings and investments
A greater focus on advisory services by providers could increase sales
Long-term care insurance offers scope for expansion

Forecast
Growing number of grey market consumers...
Figure 40: Population forecast of grey market consumers, by age and gender, 2002-06
...equal to increased sales opportunities
Figure 41: Pensioners' gross income, by source, 1994/5-2006
Alternative pension sources growing faster than benefits