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% 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% 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% 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.
Second Edition 1998
Edited by Richard Caines
ISBN 1-85765-776-4
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