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2012: Trends to watch in UK Life and Pensions

Synopsis

This report provides a detailed analysis of 9 trends that will impact the UK life and pensions market in 2012. These include the influence of technology, incoming regulation, and how consumer attitudes are altering life and pensions distribution.

Description

INTRODUCTION

The UK trends 2012 report assesses the key issues advisors and providers face in the current economic climate. Regulatory pressures will require firms to adapt their business model in 2012 ready for implementation, changing the dynamics of the market. The industry must also confront the changing behaviors consumers have towards long-term saving and protection if they are to remain competitive.

FEATURES AND BENEFITS

  • Gain an understanding of how and why the 9 trends will impact the life and pensions market in 2012.
  • Understand how regulation, technological changes and consumer attitudes will change business behaviour.
  • Target valuable opportunities for growth and avoid threats to business.
  • Gain an in depth analysis on the current UK economy and how this is expected to drive or inhibit products within life and pensions.

HIGHLIGHTS

  • 2012 will be full of regulation that providers and advisors must implement in to their business models. The strict deadlines will ensure that over the next few years firms will face continuous challenges as they adhere to the plentiful regulation. In 2012 firms will be focusing on the implementation of RDR, Solvency II, pension reform and the ECJ.
  • Distributors of life and pensions will fall through mergers, acquisitions, and, exits from the market. IFA networks will look towards consolidation to retain their competitive features whilst Bancassurers will either leave the market or market themselves as restricted due to the costs of RDR up skilling.
  • The use of technology will play a key role in the creation of new business in 2012.As advisors and providers realize the benefits of platform technology a greater number will arise in 2012. Platforms will become the superior offering for providers who want to ensure that 2012 is the year in which they deliver the key requirements of the RDR.

YOUR KEY QUESTIONS ANSWERED

  • How advisors and providers can effectively align their business structure in order to adapt to changing consumer needs post-RDR.
  • Identify threats that face advisors in 2012. Analysing how and why distributors are utilizing regulation to grow their business model.
  • Access Datamonitor's forecasts as to how each trend will shape life and pensions in 2012.
  • Decipher which providers are at the forefront of innovation in the life and pensions market?.

TOC

OVERVIEW

  • Catalyst
  • Summary

EXECUTIVE SUMMARY

  • Trend 1: The eurozone crisis continues to threaten UK financial services in 2012
  • Poor economic performance will make it difficult for providers to encourage long-term saving
  • Trend 2: Solvency II will make it difficult for providers to offer products with a guaranteed element
  • Solvency II will make it difficult for providers to offer products with a guaranteed element
  • Solvency II requirements on capital adequacy standards will encourage mergers and acquisitions
  • Trend 3: 2012 will be the year when IFAs rush to create a compelling charging structure for future profitability
  • 2012 will be the year for advisors to implement an economical business proposition to remain profitable
  • Trend 4: Workplace marketing will play a greater role in the distribution of life and pensions products in 2012
  • Providers have the opportunity to target employees of SMEs through workplace marketing
  • Trend 5: The ECJ gender ruling will see consumers dash towards the annuity and protection market in 2012
  • The annuity and protection market will grow in 2012 as consumers purchase their policies before the implementation of the ECJ ruling
  • Trend 6: IFA networks will consolidate as a direct result of pressure from the Retail Distribution Review
  • Consolidation provides advisors with a competitive advantage as they prepare for the RDR
  • Trend 7: Banks that remain in the market for financial planning will be happy to define themselves as restricted
  • The provision of restricted advice is an ideal business model for bancassurers
  • Trend 8: Technology will be one of the top concerns for the life and pensions industry
  • Providers and distributors will look to technology in order to cut costs and maximize profits
  • Trend 9: 2012 will see life and pensions providers adapt their products with influences from the US
  • Long-term care influences from the US will play a key role in the overhaul of the current UK system
  • The growth of variable annuities in the US has changed the way that UK consumers view retirement options

A REVIEW OF THE MARKET IN 2011

  • Regulatory developments dominated the life and pensions market in 2011
  • 2011 saw an increased demand for wrap platforms from advisors
  • Consolidation was seen in the advisory market in 2011 as the sector reacted to pressures under the RDR
  • Product and technological innovation increased awareness in the annuity and protection market in 2011
  • Growth in life and pensions was hindered by instability in the UK economy

MAJOR TRENDS IN 2012

  • Trend 1: The eurozone crisis continues to threaten UK financial services in 2012
  • UK-based providers will find themselves very exposed to the continuing crisis facing Europe
  • 2011 was a challenging year for the eurozone and developments at the start of 2012 are far from encouraging
  • The climate of uncertainty continues in 2012 with fresh doubts about the solvency of Europe
  • Dangerously high borrowing costs will continue to challenge governments and private companies alike
  • Consumer pessimism over the future of the UK economy will encourage engagement with long-term saving
  • Trend 2: Solvency II will make it difficult for providers to offer products with a guaranteed element
  • Solvency II will make guaranteed products less attractive to insurers due to the increased underwriting costs
  • The current European crisis will make it difficult for Solvency II to implement harmonization across European insurers
  • Trend 3: 2012 will be the year when IFAs rush to create a compelling charging structure for future profitability
  • 2012 will be the year for advisors to implement an economical business proposition to remain profitable
  • The transition to a fee-based model will need to happen quickly if IFAs are to receive a sustainable income
  • The RDR will have an overall positive impact on the market for life and pensions
  • Trend 4: Workplace marketing will play a greater role in the distribution of life and pensions products in 2012
  • Workplace marketing will be driven by the introduction of pension reform
  • A change in consumers' priorities has led to an increased demand for alternative financial planning solutions
  • Workplace marketing will enable providers to utilize a greater pool of clients post-RDR
  • In 2012 workplace marketing will provide opportunities to create new business on a larger scale
  • Trend 5: The ECJ gender ruling will see consumers dash towards the annuity and protection market in 2012
  • The annuity and protection market will grow in 2012 as consumers purchase their policies before the implementation of the ECJ ruling
  • The ECJ ruling could price insurers that rely heavily on the use of gender to set their premiums out of the market
  • Trend 6: IFA networks will consolidate as a direct result of pressure from the Retail Distribution Review
  • Without consolidation, networks will find it difficult to attract advisors post-RDR
  • Overall, IFA networks that consolidate will provide a "value for money" service to advisors
  • Trend 7: Banks that remain in the market for financial planning will be happy to define themselves as restricted
  • The provision of restricted advice is an ideal business model for bancassurers
  • Barclays has shut down its financial planning arm within banks
  • Those that are able to remain restricted will encourage providers to build stronger relationships with consumers
  • Bancassurers that exit the market due to independence costs will leave an advice gap
  • Trend 8: Technology will be one of the top concerns for the life and pensions industry
  • Providers and distributors will look to technology in order to cut costs and maximize profits
  • Providers are developing direct-to-consumer platforms in light of a change in consumer attitudes
  • Corporate platforms will provide a value for money offering to employees of larger firms
  • The right platform is crucial to ensuring firms are RDR-compliant
  • A rise in platform development will increase new business in life and pensions in 2012
  • Trend 9: 2012 will see life and pensions providers adapt their products with influences from the US
  • Long-term care influences from the US will play a key role in the overhaul of the current UK system
  • The growth of variable annuities in the US has changed the way UK consumers view retirement options
  • 2012 will be the year that the government pushes for greater responsibility on the individual

APPENDIX

  • Definitions
  • Annual premium (life)
  • Annuity
  • Annuity (pension annuity)
  • Bancassurance
  • Critical illness
  • Collective life
  • Department for Work and Pensions rebate
  • Direct sales forces
  • Distribution bonds
  • Employer-sponsored stakeholder pension
  • Endowment policy
  • Enhanced annuity
  • Fixed annuity
  • Flexible (or third-way) annuity
  • Free-standing additional voluntary contributions
  • Fund supermarket
  • Guaranteed annuity
  • Guaranteed equity bonds
  • Guaranteed income and growth bonds
  • Group personal pensions
  • Income drawdown
  • Income protection
  • Independent financial advisors
  • Index-linked annuity
  • Individual Savings Accounts (ISAs)
  • Investment bond
  • Life assurance
  • Life-based savings products
  • Long-term care insurance
  • Multi-tied agents
  • New business
  • Other bonds
  • Personal pensions
  • Purchased life annuities
  • Regular premium
  • Self-invested personal pensions
  • Single premium
  • Stakeholder pensions
  • Term assurance
  • Tied agents
  • Unit-linked bond
  • Wrap platform/wrap accounts
  • Whole-of-life insurance
  • With-profits bond
  • Further reading
  • Datamonitor research
  • Ask the analyst
  • Disclaimer

FIGURES

  • Figure: The eurozone crisis will continue to exert significant pressure on new business in life and pensions
  • Figure: Major macroeconomic events in the eurozone in 2011
  • Figure: Several eurozone members saw their long-term borrowing costs rise significantly in 2011
  • Figure: Consumers are pessimistic about the current economic climate in the UK
  • Figure: Solvency II will discourage providers from products with a guaranteed element
  • Figure: The effects of the RDR on key life and pensions products
  • Figure: IFAs will need to clarify their advice level for the benefit of the consumer
  • Figure: 12% of advisors operate none of their business through fee-based revenue
  • Figure: Workplace pension reform will increase awareness and engagement within life and pensions
  • Figure: The protection and annuity markets will face the biggest challenge when the ECJ gender ruling is implemented
  • Figure: IFAs that consolidate their business practices will be better prepared for the RDR
  • Figure: The closing of banks' financial planning arms will push many consumers away from advice
  • Figure: Primary banks are the institution that most consumers go to for advice
  • Figure: The development of platforms will grow new business in 2012
  • Figure: Influences from the US will drive UK consumers to take greater financial responsibility
  • Figure: The 1990s was a key decade for the growth of the variable annuity
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