UK Non-Unit Linked Investment Bonds 2007: Industry Research Report

UK Non-Unit Linked Investment Bonds 2007

Published Date: April 2007

Published By: Datamonitor

Page Count: 85

Order Code: R313-21603

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EXECUTIVE SUMMARY: Market focus Sector issues Competitor issues Distribution dynamics
CHAPTER 1 INTRODUCTION: What is this report about?; Who is the target reader?; How to use this report
CHAPTER 2 MARKET FOCUS: Introduction The non unit-linked products explained Income and growth Bonds Guaranteed equity bonds Distribution bonds With Profit Bonds Distribution bonds continue to dominate the non unit-linked market, although dwarfed by the rise of unit-linked bonds Distribution bonds offer the most viable alternative to unit-linked bonds The guaranteed equity bond market has further declined as investor confidence continues to grow Among the non unit-linked bonds, distribution bonds will see the strongest growth over the next five years Regulation in the investment bond market has not been specific to non unit-linked products A-Day regulation has caused some investors to consider non unit-linked bond offerings Treating Customers Fairly has been a key regulatory issue, helping to increase investor understanding of investment products Online platforms keep clients informed and offer an efficient means of client-advisor communication Wrap platforms should be part of the development process to address TCF Some experts believe that TCF will filter out the poorly-structured and poorly-performing providers while others believe FSA intervention may be necessary Data Tables
CHAPTER 3 SECTOR ISSUES: Introduction Key findings Treating Customers Fairly has forced providers to adapt their strategy but some have been more prepared than others Some providers have been slow in addressing the TCF regulation Other providers have been more meticulous on TCF, though this has come at a price Providers need to be fully aware of TCF and its implications, especially in view of upcoming deadlines and the threat of FSA action Providers need to be proactive in addressing market issues surrounding TCF Market research should also give providers good quality information to use as a basis for future product strategy Internet and open-architecture continue to be central themes for non unit-linked providers Online capability is the way forward but some IFAs may need time to adjust Open-architecture propositions continue to gather strength in the investment world The FSA has some concerns about IFA's use of platform propositions FSA is keen on bringing more transparency into with-profits Sesame has taken TCF one step further by launching an online TCF tool Scottish Equitable introduced enhanced with-profits check-up tool The average equity exposure of with-profits bonds remained below 50% in 2006 Some providers have increased with-profits bonuses and stopped MVRs Experts do not anticipate a revival of the with-profits market Many financial advisors have stopped recommending with-profits IFAs prefer to deal with providers who have a proven track record and high reputation
CHAPTER 4 COMPETITOR ISSUES: Introduction Key Findings Competitors are trying to add innovations to their products and services in order to gain a competitive edge Norwich Union and Prudential are still keen to sell with-profits bonds Legal & General launched a new guaranteed capital income bond NS&I announced increased interest rates on guaranteed income bonds and launched new tranche of guaranteed equity bonds Norwich Union added new features to its Active Protector Fund and launched a new tranche of its guaranteed fund Aegon Scottish Equitable launched innovative life assurance plan Royal London has developed a product with flexible protection Hartford Platinum seeks to offer the best of both worlds: security and growth Nationwide launched a new tranche of its guaranteed equity bond Standard Life has added new application forms in its adviserzone Norwich Union has launched an innovative consumer information website Some good news emerge from the with-profits market, at last Prudential announced an excellent year for with-profits customers AXA announces improved with-profits bonus rates and removal of MVRs However, few competitors remain active in the with-profits market Market share in the with-profits sector has changed significantly in the last few years Wesleyan and National Deposit provide the top performing with-profits bonds The with-profits bonds of Scottish Mutual and Eagle Star performed the weakest Life and pensions competitors continue to build on strategic alliances and partnerships Legal & General emphasizes the importance of open architecture Legal & General and Nationwide are set to enter a new strategic distribution agreement Skandia and Selestia announce plans for new 'best of breed' integrated platform Standard Life and Friends Provident joins forces on Wrap offering Some competitors pursue outsourcing in order to focus on core competencies Prudential and Capita sign life and pensions outsourcing contract Norwich Union reached an outsourcing agreement with Swiss Re
CHAPTER 5 DISTRIBUTION DYNAMICS: Introduction Key Findings Distribution of non unit-linked bonds is dominated by IFAs The guaranteed equity bond market is dominated by single tie bancassurance IFAs will continue to dominate the distribution of non unit-linked investment products The market's move towards fee-based financial advice will place increasing importance on the peripheral features of products Providers are continually reviewing distribution strategies Data Tables
APPENDIX: Definitions SynThesys Life Business Line Definitions Money Management Definitions Single premium policy Regular premium New business Wrap accounts Life based savings products Single Premium Life With-profits bond Guaranteed equity bonds Distribution bonds Purchased Life Annuities Other bonds ISAs PEPs Research methodology Research methodology Datamonitor's life and pensions forecasting methodology Regressional analysis is unsuitable for Life and Pensions forecasting Datamonitor uses a qualitative forecasting methodology for Life and Pensions Further reading Savings and Investments SPP Interactive Databases Reports Life and Pensions SPP Interactive Databases Reports and Briefs Financial Advice Market SPP SPP writing team
List of Tables: Table 1: New business premiums in investment bonds, GBPm APE, 2002-2006; Table 2: New business premiums in investment bonds, GBPm APE, 2007f-2011f; Table 3: Guaranteed equity bonds new business vs the FTSE, GBPm APE, 1995-2007; Table 4: Asset allocation of with profits bonds as at 1 October 2006; Table 5: With-profits cash in values for £10,000 investment, 2001-2006; Table 6: Top 5 life companies new with-profits business, GBPm APE, 2001-2005; Table 7: Best 5 performers: actual cash in values for £10,000 investment as at 1 October 2006; Table 8: Worst 5 performers: actual cash in values for £10,000 investment as at 1 October 2006; Table 9: Market share for total non unit-linked bonds, GBPm, 2002-2006; Table 10: Market share for income and growth bonds, GBPm, 2002-2006; Table 11: Market share for with-profits bonds, GBPm, 2002-2006; Table 12: Market share for guaranteed equity bonds, GBPm, 2002-2006 Table 13: Market share for distribution bonds, GBPm, 2002-2006; Table 14: Market share for total non unit-linked bonds, GBPm, 2007f-2011f; Table 15: Market share for income and growth bonds, GBPm, 2007f-2011f; Table 16: Market share for with-profits bonds, GBPm, 2007f-2011f; Table 17: Market share for guaranteed equity bonds, GBPm, 2007f-2011f; Table 18: Market share for distribution bonds, GBPm, 2007f-2011f
List of Figures: Figure 1: The effect of smoothing stock market movements on reserves and payouts; Figure 2: The non unit-linked bond sector showed a slight sign of recovery in 2006; Figure 3: Sales of guaranteed equity bonds further decline while the FTSE continues its recovery; Figure 4: Distribution bonds will grow strongest in the next five years; Figure 5: An IFA Satisfaction Study report identified the top 6 preferred providers for distribution bonds; Figure 6: Norwich Union launched 'make sense of it' website in order to help customers find their way in the financial products jungle; Figure 7: Top 5 providers' share of with-profits new business has shifted significantly between 2001 and 2005; Figure 8: The ONE model represents Cofunds' central interface for IFAs; Figure 9: IFAs were the dominant channel for non unit-linked products in 2006; Figure 10: The guaranteed equity bond market is dominated by single tie bancassurance; Figure 11: IFAs will continue to dominate the non unit-linked market; Figure 12: The product lines forecasted in Datamonitor's Life and Pensions model Figure 13: Quasi-delphi forecasting technique

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