KN66028 KEY NOTE PENSIONS JANUARY 1998

ISBN 1-85765-776-4

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Table of Contents

Executive Summary

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TABLE OF CONTENTS

Executive Summary

Market Definition

INTRODUCTION

MARKET SECTORS

MARKET TRENDS

Market Size

THE TOTAL MARKET

BY MARKET SECTOR

Table 1: The Total UK Pensions Market at Current Prices (£bn), 1992-1997

Table 2: Total UK Market for Personal Pensions by Main Source of Business (£m), 1992-1996

Table 3: UK Personal Pensions New Business (000 and £m), 1992-1996

Table 4: Personal Pensions New Business by Product Type (£m), 1992-1996

Table 5: UK Individual Personal Pension Policies in Force at Year End (000), 1992-1996

Table 6: Individual Personal Pensions Sold to Self-Employed Versus Employed Persons by Volume and Value ( percent), 1992-1996

Table 7: Group Personal Pensions by Premium Value (£m), 1994-1996

Table 8: Premium Income From Occupational Pensions Schemes (£m), 1992-1996

Industry Background

RECENT HISTORY

INDUSTRY CONCENTRATION

DISTRIBUTION

EMPLOYMENT

TRADE ASSOCIATIONS

Table 9: Membership of Pension Schemes in Great Britain ( percent), 1995

Table 10: Estimated Sales and Market Shares for Major Providers of New Business for Personal Pensions in the UK (£m and percent), 1994-1996

Table 11: Occupational Pensions Schemes - Methods of Investing Funds by Type of Scheme ( percent of schemes), 1996

Table 12: Sources of New Premiums for Individual Pensions Business ( percent), 1992-1996

Table 13: Companies Telephone Selling Pensions in the UK Market, 1996/1997

Table 14: Number of Employees in UK Insurance (000), 1992-1996

Competitor Analysis

THE MARKETPLACE

THE MAJOR PROVIDERS

ADVERTISING AND PROMOTION

Table 15: Profile of the Top Ten UK Pensions Providers (£bn), 1996

Table 16: Equitable Life - Financial Profile (£m), 1986-1996

Table 17: Prudential UK - Financial Profile (£m), 1993-1996

Table 18: Standard Life Assurance Company - Gross Premiums Written and New Business (£m), 1995 and 1996

Table 19: Norwich Union Insurance Group - UK Gross Premiums Written and New Business (£m), 1995 and 1996

Table 20: Scottish Equitable PLC - Gross Premiums Written and New Business (£m), 1995 and 1996

Table 21: Sun Life and Provincial Holdings PLC - Gross Premiums and New Business Pensions (£m), 1996

Table 22: Scottish Widows - Gross Premiums and New Business (£m), 1995 and 1996

Table 23: Legal & General Group PLC - Gross Premiums and New Business Pensions (£m), 1995-1996

Table 24: Allied Dunbar Assurance PLC - Gross Premiums and New Business (£m), 1995 and 1996

Table 25: Main Media Advertising Expenditure on Pensions by Leading Assurance Companies (000), Years Ending December 1994-1996

Strengths, Weaknesses, Opportunities and Threats (SWOT)

STRENGTHS

WEAKNESSES

OPPORTUNITIES

THREATS

Buying Behaviour

CONSUMER PENETRATION

OCCUPATIONAL SCHEMES

PENSIONS CONTRIBUTIONS

OFFICE OF FAIR TRADING CONSUMER SURVEY

Table 26: Ownership of Pensions by Adults in Great Britain (000 of adults and percent), 1994 and 1997

Table 27: Estimated Profile of UK Occupational Pensions Schemes by Type and Size, 1996

Table 28: Share of Contributory Schemes and Members Contributions ( percent of pensionable earnings), 1996

Table 29: Main Factors Determining Calculation of Pensions ( percent of schemes), 1996

Table 30: Expenditure on Pensions by Average UK Households (£ and percent), 1996/1997

Table 31: Anticipated Proportion of Income in Retirement Coming from Basic State Pension ( percent), 1996

Table 32: Pensioners In/Out of SERPS at Time of Retirement ( percent), 1996

Table 33: Summarised Pension Arrangements of Non-Pensioner Employees ( percent), 1996

Table 34: Number of Occupational Pension Schemes of Which Respondents Had Been Members ( percent), 1996

Table 35: percentage of Pre-Retirement Income Expected After Retirement ( percent), 1996

Table 36: Pension Characteristics Required by Pensioners and Non-Pensioners ( percent nominating), 1996

Table 37: Sources of Advice Used for Pensions - Pensioners and Non-Pensioners ( percent), 1996

Outside Suppliers to the Industry

INTRODUCTION

TAX CREDITS

PENSION FUND INVESTMENT MANAGEMENT

PENSION FUND RETURNS

Table 38: Principal Forms of Pension Fund Management ( percent), 1994-1996

Table 39: Medium and Long-Term Real Returns from UK Pension Funds ( percent per annum), 1963-1996

Table 40: Estimated Distribution of UK Pension Fund Assets by Type of Investment (£bn and percent), End 1996

Current Issues

THE STAKEHOLDER SCHEME

SERPS

GROUP PERSONAL PENSIONS

VIRGIN DIRECT

EAGLE STAR LIFE

DIRECT LINE PERSONAL PENSIONS

MIS-SELLING

MARKS & SPENCER

COMPULSORY CONTRIBUTIONS

BARING ASSET MANAGEMENT

THE PENSION CONNECTION

Forecasts

FUTURE PROSPECTS

FORECASTS 1998 TO 2001

Table 41: Forecast Total UK Pensions Market at Current Prices (£bn), 1998-2001

Company Profiles

INTRODUCTION

DEFINITIONS

FURTHER INFORMATION

Further Sources

ASSOCIATIONS

PERIODICALS

DIRECTORIES

GENERAL SOURCES

HBI UK INFORMATION SOURCES

GOVERNMENT PUBLICATIONS

OTHER SOURCES

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EXECUTIVE SUMMARY

The UK is in the middle of the biggest review its pensions market has ever seen, with more than 1,700 responses being submitted to the Government's request for views on a new low-cost `stakeholder' second-tier pension to bolster the faltering state scheme.

Following its own extensive inquiry, the Office of Fair Trading (OFT) has separately found consumer detriment to be widespread in occupational and personal pensions and has launched the blueprint for a new style of pension product named the Designated Personal Pension. Other major papers have been issued by the National Association of Pension Funds (NAPF) and the Association of British Insurers (ABI).

In this market report, Key Note gives its ideas on the likely shape of tomorrow's stakeholder pension and predicts that the final outcome of the Government review will be good for the UK pensions industry. Over the next 5 years, Key Note forecasts that total annual premium income from all forms of pensions, including business in force, will increase by 27.9 percent to reach £29.8bn by the end of 2001.

The biggest growth will be in personal pensions, for total premium income will rise by 30 percent to a level of £17.3bn at current prices in 2001. Occupational pensions, with their own version of a stakeholder pension, are forecast to rise a little more slowly, but still to increase by 25 percent and reach £12.5bn at current prices by the end of 2001.

Research shows a small increase in the number of people who realise the importance of investing in a pension, but even so, the latest figures once more confirm that one in two of tomorrow's UK pensioners face a bleak retirement unless they, or the Government on their behalf, do something about it. Pensions are thought to be too complicated by a majority of the public and lack of knowledge about pensions is almost a national disease.

The distribution patterns in the pensions market are likely to change considerably in the years ahead. Pensions products will become simpler and easier to sell, with the consumer protected even more stringently. To reach a wider audience, new market entrants will break through the financial services industry stranglehold to offer products through supermarkets, by telemarketing, over the Internet and via interactive television services.

Text © 1998 Key Note

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