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UK Retirement Income Market Report

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  • 58 Pages
  • May 2020
  • Region: United Kingdom
  • IRN Research
  • ID: 5067400

The main purpose of this report is to review the UK pension decumulation market, i.e. how consumers are taking money from their pensions.

The prime focus is on decumulation from defined contribution pensions and especially how the pension decumulation market has changed under the impact of a series of legislative and regulatory changes, which have radically reshaped the types of pensions consumers have and how they are managing their pensions.

Report Highlights:

8 million adults in the UK are using a pension (other than the State Pension) to generate income, of which 4.6 million classify themselves as retired. Workplace pensions are the main source of pension income, with DB occupational pensions the most important.

The total sums insurance companies and self-administered pension funds pay out to individuals in receipt of a pension or to those taking cash from a pension, are expected to be in the order of £246.5 billion in 2019, 6% more than in 2018. This covers payments to all individuals in the UK and those living overseas.

Executive Summary
  • A multi-faceted market structure
  • Key market developments
  • Pensioners adopt a portfolio approach to retirement.
  • Most decumulation products are sold with advice
  • 8 million pensioners
  • Almost £250 billion paid out
  • The Future
  • Broad Definitions
  • Workplace Pensions
  • Private schemes
  • Decumulation Actions
  • Abbreviations
Market Structure
  • Multiple means to access pension money
  • The risk transfer market complicates the picture
  • Number of companies
  • Almost 37,000 occupational schemes
Market Developments and Drivers
  • Covid-19
  • Almost 8 million adults are using a pension to generate income
  • One-in-five over 50-year-old pension holders have decumulated
  • Many consumers are not confident that they are saving enough…
  • So, pension holders adopt the portfolio approach to retirement
  • Because, many adults don’t have very large pension pots
  • Persistent concerns over pension transfers
  • Investment funds used for pensions told to consider if they are good value
  • The Pension Scheme Bill
  • The Pensions Regulator consults on revising its code of practice for DB funding
  • The FCA confirms retirement pathways will be introduced
  • Brexit
Decumulation Product Distribution
  • Overview of the distribution process
  • Most sales go via intermediaries
  • Captive and open markets
The Key Players
  • Largest Pension funds
  • The largest bulk annuity firms
Market Size and Trends
  • Almost 300,000 decumulation products sold in 2019
  • But almost 650,000 pension pots accessed for the first time
  • Smaller pots tend to be fully withdrawn
  • With over 2 million taxable flexible payments taken
  • When buying annuities, pension holders mainly select level only annuities
  • Around £250 billion paid out every year
  • Risk transfer market powers ahead
The Future
  • The Big Unknowns
  • There is a greater need for consumer advice and guidance
  • New investment products are likely
List of Figures
Figure 1 Broad summary of pension types
Figure 2 The structure of the DC decumulation market
Figure 3 The pensioner landscape, 2019
Figure 4 Aggregate DB pension scheme deficits, 2016-2020
Figure 5 The number of individuals in receipt of income from a pension
Figure 6 How Pension Savers have acted to access cash in their pensions
Figure 7 The non-pension income sources in retirement*
Figure 8 Breakdown of pensioner and retired household income and reliance on non-State pensions, 2018/19
Figure 9 The median size of pension pots by age, April 2016-March 2018
Figure 10 How decumulation products are distributed (% of volume), 2014-2019
Figure 11 How pension pots are accessed by product used, 2017-2019
Figure 12 Examples of leading drawdown providers in the UK
Figure 13 The largest individual UK pension funds (% of industry assets under management), 2018/19*
Figure 14 The importance of local authority pension schemes and scheme pools, 2018/19
Figure 15 The largest players in the bulk annuity market (% of deal value), 2008-2019*
Figure 16 The number of decumulation products sold 2009-2019
Figure 17 The number of pension pots accessed by decumulation actions, 2015/16-2018/19
Figure 18 The average size of pension pots accessed by decumulation actions, year ending March 2019
Figure 19 The number and value of payments taken from DC pension funds, 2015-2020
Figure 20 Summary of cash taken from pension funds, 2018/19
Figure 21 The types of annuities purchased when accessing pension pots, 2015/16-2018/19
Figure 22 Expenditure on pensions (£billion), 2010-2019
Figure 23 The risk transfer market (£bn), 2014-2019