United Kingdom (UK) Pre-Retirement Pensions Market 2020

The total UK pensions market grew 16.1% to £16.4bn annual premium equivalent (APE) in 2019. Workplace pensions drove growth as minimum pension contributions increased to 8%. Direct benefit to direct contribution transfers continue as companies de-risk and individuals take advantage of pension freedoms. COVID-19 will bring uncertainty to saving for retirement. The UK economy has officially entered into recession and disposable incomes are set to fall as unemployment rises. This will force many individuals to temporarily stop making pension contributions as they cut non-essential spending. The UK pensions market is projected to contract at the start of the forecast period before returning to growth.

This report examines how the pensions market is changing as consumers are encouraged to save in personal pensions while state pension funding is under pressure. It discusses the impact of auto-enrollment on saving, as well as other regulatory changes. The report explores consumers’ attitudes towards planning for retirement, examines how engaged they are with their pensions, and identifies how they access financial advice on their investments. It also discusses how consumer awareness around pensions can improve with technological developments.

The report provides current and historical data on the size of the market by product type – covering individual pensions, workplace pensions, and trust-based pensions – and distribution channel. The size of the pensions market has been forecast to 2024.

Scope

– A notable 16.7% of individuals do not know how much their pension is worth. Of those who do, over half stated that their main pension pot is worth less than £30,000.

– Women have considerably smaller pension pots than men and their state pension is lower.

– 30.1% do not register to use their pension provider’s website, while a further 12.5% have registered but never used it.

Reasons to buy

– Examine the size of the pensions market.

– Learn about recent market developments and upcoming regulatory changes.

– Discover how consumers are saving towards retirement.

– Understand consumer engagement with their pensions.

– Learn about the impact of COVID-19 on pensions.

Companies mentioned

Aviva

Prudential

Lloyds Banking Group

Phoenix Group Holdings

Zurich Financial Services

BlackRock

Fidelity

LV=

Quilter

Rothesay Life

Royal London

Pension Insurance Corporation (PIC)

Just Group

Canada Life

Threadneedle Pensions

Aegon

PensionBee

Yolt

Starling Bank

Lumio

Money Dashboard

Table of Contents

Table of Contents

1. EXECUTIVE SUMMARY

1.1. COVID-19 will cause uncertainty in the pensions space

1.2. Key findings

1.3. Critical success factors

2. THE STATE PENSION

2.1. The UK population is aging, squeezing the state pension

2.2. The state pension is insufficient and funding is under pressure

2.3. Almost half ofindividuals retire upon reaching the SPA

2.4. Individuals believe the state pension will help fund their retirement

3. THE PRIVATE PENSION MARKET SIZE AND COMPETITIVE LANDSCAPE

3.1. Workplace pensions make up the largest share of the market

3.2. Royal London and Rothesay Life lead the market for pensions

4. TRENDS IN SAVING FOR RETIREMENT

4.1. Auto-enrollment has boosted individual pension savings

4.2. There has been a shift away from DB schemes

4.3. Pension pot characteristics and saving attitudes

4.4. The impact of COVID-19 on consumer attitudes towards pensions

5. PENSIONS ENGAGEMENTAND ADVICE

5.1. A substantial proportion of individuals do not receive financial advice on their pension plans

5.2. Customers are rarely actively engaged with their retirement saving

5.3. Open finance and pensions dashboards can improvepension awareness and engagement

5.4. Improving awareness of pension income closer to retirement is another area of focus

6. APPENDIX

6.1. Abbreviations and acronyms

6.2. Definitions

6.3. Methodology

6.4. Secondary sources

6.5. Further reading

List of Tables

List of Tables

Table 1: Trust-based premiums APE by product type (£m), 2015-19

Table 2: Individual premiums APE by product type (£m), 2015-19

Table 3: Top 10 UK individual and workplace pension providers by GWP, 2018

Table 4: Top 10 UK trust-based pension providers by GWP, 2018

Table 5: Size of main pension pot split by gender (all ages), 2020

Table 6: New total premiums APE by advice type (£m), 2015-19

List of Figures

List of Figures

Figure 1: The proportion of the UK population made up by over 65s is projected to grow

Figure 2: The old-age dependency ratio is projected to increase as the population ages

Figure 3: The SPA is increasing

Figure 4: The gender pension gap has fallen drastically

Figure 5: Pensioner poverty has increased in recent years, following a period of sustained decline

Figure 6: Most individuals plan to retire upon reachingthe state retirement age

Figure 7: Household income is a key determinant of when individuals plan to retire

Figure 8: Most individuals retire at around the SPA

Figure 9: The majority of individuals regard the state pension as the key way to fund their retirement

Figure 10: The total pension market grew 16.1% to £16.4bn APE in 2019

Figure 11: The pensions market will contract in 2020as a result of COVID-19, before returning to growth

Figure 12: Auto-enrollment staging by business size was completed in February 2018

Figure 13: Younger generations are the biggest winners from the introduction of auto-enrollment

Figure 14: Total minimum contributions rose to 8% of qualifying earnings in April 2019

Figure 15: 29.6% of workplace pension holders would never opt out irrespective of the contribution rate

Figure 16: The value of pension transfers has fallen, having boomed in 2017

Figure 17: 78.5% of respondents have a group, company,or workplace pension

Figure 18: Many individuals consolidate their pension pots at around retirementage

Figure 19: DC pensions dominate workplace pensions among younger individuals

Figure 20: Individuals lose track of how much their pension is worth over their working life

Figure 21: A substantial proportion of individuals aged 50 and above believe the size of their main pension pot is worth in excess of £100,000

Figure 22: On average the private pension pot of a man is three times the size of a woman’s

Figure 23: Single individuals need at least £10,200 per annum at retirement to cover expenses

Figure 24: Most individuals desire an income between £1,000 and £2,999 per month in retirement

Figure 25: 55.4% of individuals contribute ≥6% of their income to their pension

Figure 26: It is most common for employers to contribute at the minimum legal requirement

Figure 27: Confidence on how long pensions will last has eroded as a result of COVID-19

Figure 28: The majority of individuals have checked the value of their pensions as often as before the outbreak of the pandemic

Figure 29: Trust in pension providers remains largely unchanged by COVID-19

Figure 30: The independent advice channel accounts for the largest share of distribution for all types of pensions

Figure 31: Less than half of non-retired individuals seek advice about their pensions

Figure 32: Individuals are most likely to use free advice services when they require advice on their pensions

Figure 33: Most individuals do not register to use their pension provider’s website

Figure 34: COVID-19 has not changed most individuals’ frequency of communication with their pension provider

Figure 35: Most rely on default settings preselected by their pension provider

Figure 36: Pensions dashboards are set to reconnect individuals with all their pensions and improve awareness

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