Overview 1
Catalyst 1
Summary 1
Table of Contents 2
Table of figures 3
Table of tables 4
Retail Distribution Review 5
The key elements of the RDR 5
Improved clarity of services was a key aim of the RDR 5
Remuneration will become less open to influence by providers 6
Standards of professionalism in the industry will be improved 6
The RDR development process continues 7
Responses to the RDR have been mixed 8
Key criticisms of the RDR are that it hasn't fulfilled the clarity it promised to deliver 8
Datamonitor view of the RDR reforms 8
Product Distribution through the IFA CHannel 10
The IFA channel accounts for nearly half of total life and pensions sales in the UK 10
The total regular premium life market has declined by a compound annual rate of 9% 12
Term assurance dominates regular premium life sales by IFAs 13
The market for endowments has collapsed 14
Savings-related term has withstood market pressures, despite mortgage-related sales being strongly impacted by the housing market 15
Total single premium life market has grown by an annual compound rate of 24.1% 16
Unit-linked bonds dominate the single premium life market for IFAs, although there has been strong growth in guaranteed bonds 16
Guaranteed bonds have grown in popularity with IFAs, fuelled by withdrawals from equity investments 18
Personal pensions dominate the pensions market in terms of new business from IFAs 19
SIPPs continue to be the most popular pensions product among IFAs 22
Despite the dominance of personal pensions, SIPPs have experienced the most impressive year-on-year growth over the last five years 22
A clear definition of SIPPs is necessary to ensure that IFAs do not sell an incorrectly defined product 22
Appropriate segmentation and targeting of SIPPs can help IFAs boost take-up and retention 23
The financial advisor channel is forecast to remain dominant going forward 23
Sales of savings-related term assurance by IFAs is forecasted to dominate the regular premium life market 24
Differing views exist as to the impact of the economic downturn on protection sales 25
Datamonitor forecasts unit-linked bonds to continue their lead in single premium life sales by IFAs, although guaranteed bonds will increase in popularity 26
Guaranteed bonds are positively impacted by their guarantee element and CGT changes 26
Group personal pensions are forecasted to dominate the regular premium pensions market 28
The market will increasingly be shaped by SIPP products at the expense of stakeholder and personal pensions 30
Product Distribution through Bancassurance 33
The bancassurance channel has failed to challenge the dominant IFAs 33
The current bancassurance single premium life market is dominated by unit-linked and guaranteed bonds 34
Unit-linked bond products complement the bancassurance model with their simplicity 34
Bancassurance is growing stronger in guaranteed bonds fuelled by withdrawals from equity investments 35
Regular life premiums for bancassurers have been adversely affected by the mortgage crisis 36
The collapse of the endowment market has taken its toll on regular premiums 36
Savings-related term has withstood market pressures, despite mortgage-related sales being impacted by the housing market 36
IP and CII premiums have also suffered although they account for a very small percentage of bancassurers' regular life business 38
Bancassurers have not been able to increase their pensions business over the last 5 years 38
Single premium income has been helped by the increasing popularity of SIPPs and bancassurers have taken their share 40
Stakeholder pensions dominate the bancassurers' single and regular premium pensions income 42
APPENDIX 44
Product definitions 44
Life-based savings products 44
Life assurance 44
Single premium life 44
With-profit bond 45
Unit-linked bond 45
Income and growth bonds 45
Guaranteed equity bonds 45
Distribution bonds 45
Purchased life annuities 45
Other bonds 45
Annual premium life 45
Endowment policy 46
Whole of life insurance 46
Term assurance 46
Income protection 46
Critical illness 46
Collective life 46
ISAs 47
Personal pensions 47
Stakeholder pensions 47
Group personal pensions (GPPs) 47
DSS rebates 47
Employer-sponsored stakeholder pension (ESS) 47
SIPPs (Self Invested Personal Pensions) 48
FSAVC (Free-Standing Additional Voluntary Contributions) 48
ABI definitions of distribution channels 48
Independent financial advisors (IFAs) 48
Direct sales forces 48
Tied agents 48
Multi-tied agents 48
Bancassurance 49
Direct marketing 49
Telesales 49
Other 49
Further reading 50
Ask the analyst 50
Datamonitor consulting 50
Disclaimer 50
List of Tables
Table 1: Total life and pensions new business by distribution channel, £m APE 12
Table 2: Total regular premium life new business premiums segmented by distribution channel, £m APE 13
Table 3: Regular premium life sales by IFAs, £m APE 15
Table 4: Total single premium life sales segmented by distribution channel, £m APE 16
Table 5: Single premium life sales through the IFA channel, £m APE 18
Table 6: Regular premium pension sales by IFAs, £m APE 20
Table 7: Single premium pension sales by IFAs, £m APE 21
Table 8: Forecast total life and pensions sales by distribution channel, 2008-2012, £m APE 24
Table 9: Forecast regular premium life market new business premiums, 2008-2012, £m APE 26
Table 10: Forecast single premium life market new business premiums, 2008-2012, £m APE 28
Table 11: Forecast regular premium pensions new business premiums through IFAs, 2008-2012, £m APE 30
Table 12: Forecast single premium pensions new business premiums, 2008-2012, £m APE 32
List of Figures
Figure 1: FSA diagram of new investment distribution framework 6
Figure 2: Financial advisors dominate the sale of life and pensions products 11
Figure 3: Protection and mortgage-related term dominate regular premium life sales through the IFA channel 14
Figure 4: Unit-linked bonds account for 59% of total single premium life sales through the IFA channel 17
Figure 5: Group personal pensions dominate sales by IFAs in the regular premium market 19
Figure 6: Personal pensions continued to dominate the single premium pensions market in 2007 21
Figure 7: The regular premium life market will see slender growth over the next five years 25
Figure 8: Unit-linked bonds will still command single premium life sales by IFAs over the next five years 27
Figure 9: Regular pensions sales through IFAs will rise by a compound rate of 6% between 2008 and 2012 29
Figure 10: The single premium pensions market through IFA sales will remain static between 2008 and 2012 31
Figure 11: Bancassurers' mix of life and pensions business has not gained momentum 33
Figure 12: Bancassurers have focused their sales efforts on unit-linked and guaranteed bonds 35
Figure 13: The mortgage crisis has taken its toll on regular premiums sold through bancassurers 37
Figure 14: Banks have not been able to increase their share of the pensions market between 2003-2007 39
Figure 15: SIPPs and stakeholder pensions are the two most important single premium pension income generators for bancassurers 41
Figure 16: Stakeholder pensions dominate the bancassurers' regular premium income in 2007 43