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UK Pensions Market 2018: Market Trend Report

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  • 74 Pages
  • August 2018
  • Region: United Kingdom
  • IRN Research
  • ID: 4604064

UK Pension Funds Received Total Contributions of Almost £190 billion, Representing a 20% Rise Over the Level of 2016

An Extra 10.3 Million People have Workplace Pensions Since 2012 But More Work is Needed

The UK pension market is large and diverse, with over 22 million employees in the UK having a workplace pension with most of these (around 16 million) enrolled in an occupational scheme.  In 2017, over 2 million new pension products were sold to members of the public and UK pension funds received total contributions of almost £190 billion, representing a 20% rise over the level of 2016.

Between 2012 and 2018, an extra 10.3 million employees held a workplace pension, with most signing up to workplace pensions because of auto-enrolment (AE). The vast bulk of AE pension schemes established have been Defined contribution (DC) schemes, primarily DC master trust schemes. These changes have coincided with increased longevity and generally low investment returns in recent years which have forced many deferred benefits (DB) pensions schemes into financial deficit, with employers increasingly closing their schemes to new members.

Despite this market size and level of growth, the market faces several concerns. Specifically, the low level of knowledge and engagement of consumers with their pensions, which is encouraging possibly unwise cash withdrawals from DC pensions and unwise transfers from DB pensions.  There are also concerns about the low levels of contributions being made into pensions, especially auto-enrolled workplace schemes. The regulators are also looking more closely at the sector to improve the operational efficiencies of pension schemes and improve the safety of these schemes for their members.

In addition to the market size and trends, this report looks at the structure of the market for pensions, discusses the drivers of demand, the factors changing how the market operates and key developments with the market. It also looks at the main pension providers and provides forecasts to 2022.

Table of Contents

Executive Summary
  • Broad Definitions
  • Detailed definition of workplace and private pensions
  • Pension withdrawals
  • Lump sum (single) or regular premiums
  • Abbreviations
Market Structure
  • Three-Tiered Market
  • Multiple routes to market and multiple market players
  • Most personal pensions are sold indirectly without advice
  • Most occupational schemes are sold direct without advice
  • Most pension funds use investment consultancies
  • Just over one-quarter outsource their management
  • Number of companies
  • Over 40,000 occupational schemes
Market Developments and Drivers
  • Auto-enrolment radically re-shapes the pension industry…
  • However, a third of people have no private pension provision
  • And most don’t know if they are saving enough…
  • So the FCA suggested a pension dashboard: a good idea which may be killed off
  • Pension holders increasingly adopting the portfolio approach to retirement …
  • Because, many adults don’t have very large pension pots
  • And many are withdrawing their pensions ahead of retirement
  • Concerns over pension transfers
  • Things get harder for wealthiest pension holders
  • Pensioners, the Government and occupational pensions hit by increased longevity…
  • Potential change to how all pension funds are managed
  • Potential new rules governing the security and sustainability of DB schemes
  • Occupational Pensions Schemes (Master Trust) Regulations 2018
  • The FCA turns its attention to private pensions
  • New European rules will impact on pension fund management
The Key Players
  • Scheme asset managers
  • Largest scheme providers
  • Selected profiles
Market Size and Trend
  • Over 22 million have a workplace pension
  • Over 5 million members in private pensions
  • Over 2 million pension products sold each year
  • Pension premiums contributions exceed £200 billion
  • Occupational pensions represent the bulk of the market
  • Most pension contributions are lumpy
  • Risk transfer market explodes
The Future
  • The Big Brexit unknown
  • Will collective defined contribution (CDC) pension schemes come to the market?
  • Pension fund consolidation
  • Auto-enrolment needs to be enhanced
  • Increased longevity may also lead to a means-tested State pension
  • Forecast Assumption
  • The Forecasts
List of Figures
  • Figure 1 Broad summary of pension types
  • Figure 2 Personal pension sales (% of total) by advice and channel, 2006-2017
  • Figure 3 Personal pension sales (% of total) by channel and type of pension, 2017
  • Figure 4 Occupational pension sales (% of total) by advice and channel, 2006-2017
  • Figure 5 The workplace pension landscape, end 2017
  • Figure 6 % of employees with a workplace pension (July-September each year), 2005-2018
  • Figure 7 The number of auto-enrolled employees, January 2013-June 2018
  • Figure 8 Schemes used for AE as at July 2017
  • Figure 9 The number of DC occupational schemes*, 1988-2017
  • Figure 10 Membership of DC occupation pension schemes by scheme size (000) *, 2009-2017
  • Figure 11 Use of DC schemes for auto-enrolment, year-end 2017
  • Figure 12 Trends in DC scheme* membership by scheme status, 2012-2017
  • Figure 13 The percentage of adults with a pension* by type of pension and age, 2017
  • Figure 14  Current size of total defined contribution pension savings by age, 2017
  • Figure 15 Trends in flexible pension withdrawals, 2015-2018
  • Figure 16 The UK pension allowances, 2006-2018
  • Figure 17 Percentage of the population of State Pension Age and older*, 2016-2041
  • Figure 18 Aggregate DB pension scheme deficits, 2011-2018
  • Figure 19 Breakdown of members of DB Occupational pension schemes, end 2017
  • Figure 20 Active members of DB occupational pension schemes (year-end), 2010-2017
  • Figure 21 The DB pension scheme landscape, 2010-2017
  • Figure 22 Share of pension fund assets managed by asset managers, 2016/17
  • Figure 23 The largest UK pension funds (% of industry assets under management), 2016/17*
  • Figure 24 UK trust assured master trusts, July 2018
  • Figure 25 The largest players in the bulk annuity market (% of deal value), 2017
  • Figure 26  Employees enrolled into workplace pension schemes, 2005-2018
  • Figure 27 Trends in membership of personal pension schemes by sponsorship, 2001-2018
  • Figure 28 The number of pension products sold each year, 2010-2017
  • Figure 29 Total contributions* to UK pension funds (£bn), 2010-2018
  • Figure 30 Breakdown of contributions by broad type of pension (£bn), 2010-2018
  • Figure 31 Detailed breakdown of contributions by narrow type of pension (£bn), 2010-2018
  • Figure 32 Breakdown of contributions by nature of the payment (£bn), 2010-2018
  • Figure 33 Detailed breakdown of contributions by nature of the payment (£bn), 2010-2018
  • Figure 34 The percentage of pension products sold as regular premium products, 2006-2017
  • Figure 35 The risk transfer market (£bn), 2010-2018
  • Figure 36 UK pension contributions (£bn), 2017-2022
  • Figure 37 The retail sales of pension products (000), 2017-2022