Albany, NY -- (SBWIRE) -- 09/18/2014 -- There is no doubt that the annuities market will suffer a significant drop in 2014, possibly 2015 as well, but consumer demand for a retirement income that provides a predictable, guaranteed income will result in annuities bouncing back.

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Table of Content

Introduction

Report scope
Abbreviations

Executive Summary

The market

Annuity sales dropped by 15% in 2013
Figure 1: Forecast of value of annuities sales, 2009-19
Non-advised sales now dominate the annuities market
Figure 2: Value of total annuities policy sales, by sales channel, 2013

Market factors

Longer retirements pose challenges for consumers and insurers…
Figure 3: Life expectancy at age 65, 1981-2062
… and increases dependency on workers
Rock-bottom interest rates make non-pensions savings less attractive…
Figure 4: BoE base rate, CPI, RPI monthly changes, January 2009-June 2014
… but annuity rates are hardly appealing
Figure 5: Annuity rates and gilt yields, January 1991-July 2014
Reforms set to revolutionise the retirement industry
All retirees to receive free guidance
Companies, products and innovations
Aviva is the market leader in annuity sales
Figure 6: Market share of top four annuity providers versus rest of annuities market, 2013
Insurers withdrew from advertising in 2013/14 as uncertainty rose
Figure 7: Total adspend on annuities and income drawdown products, 2012-14
Insurers offer new products in response to the Budget

The consumer

A quarter of over-45s will be eligible to buy an annuity
Figure 8: Pension and investment product ownership, May 2014
Three quarters are aware of pension reforms, but only half feel they understand the implications
Figure 9: Awareness of changes to pension market announced in 2014 Budget, May 2014
Less than a quarter of potential annuity customers are planning to buy one
Figure 10: Expected retirement income plans, May 2014
Most people expect to see an IFA about their retirement options
Figure 11: Expected sources of retirement information, May 2014
Core annuity features remain top of most retirees’ wishlist
Figure 12: Desired features of retirement income, May 2014
What we think

Issues and Insights

People need to be shown why an annuity may still be their best option
The facts
The implications
Guaranteed guidance must convince straight away, starting online
The facts
The implications

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Trend Application

Be open about death to offer the most suitable product
Highlight the disappointment of having a small pension fund
Preparing for retirement starts now!

Market Drivers

Key points

Longer lives are stretching pension provisions
Figure 13: Life expectancy at age 65, 1981-2062
An ageing population will increase dependency on workers
Figure 14: Projected proportion of UK population by age bands, 2013-62
A worrying proportion have little or no pension provision
Figure 15: Pension and investment product ownership, May 2014
Savers continue to suffer low rates
Figure 16: BoE base rate, CPI, RPI monthly changes, January 2009-June 2014
Annuity rates remain low
Figure 17: Annuity rates and gilt yields, January 1991-July 2014

Regulatory Environment

Key points
Pension liberalisation promises to revolutionise retirement
Guidance guarantee to help retirees with new options

Income Drawdown Overview

Key points

Almost 50% growth in income drawdown value
Figure 18: Annuities versus income drawdown plans, 2009-13
External sales still dominate income drawdown plans
Figure 19: Share of external and internal sales of annuities and income drawdown plans, 2013
Nearly nine in ten income drawdown plans are IFA-arranged
Figure 20: New income drawdown plans, by sales channel, 2013

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