Back in the day, if you bought a personal pension or its predecessors you would have been offered a long list of insurers to choose from that would have included
Lloyd’s Life, Target Life, General Portfolio,Trident Life, Irish Life, Abbey Life, Hambro Life, Hill Samuel and Mechant Investors.
These were the brave new breed of unit-linked insurers who had “moved on ” from with-profits to offer you direct access to managed funds.
If you had spoken to a more established advisory firm, the choice would have been from the “old guard” of Eagle Star, Prudential, Norwich Union, Provident Mutual, UK Provident, NPI, National Mutual, Equity and Law, Sun Life, Commercial Union, General Accident, the Pearl CIS and the Prudential.
What have all these insurers got in common?
Answer, you can’t buy one of their personal pensions today.
The consolidation of the UK Life insurance industry has been spectacular.
Today , if you want to buy a plan for yourself, you will struggle. There are insurers who will still offer you a personal or stakeholder pension, but you are going to have to jump through some hoops to be able to buy one yourself. The insurers (and the FSA) want you to buy through an intermediary and , since they have disbanded their sales forces) that intermediary will in some sense be “independent”.
Alternatively you can join a scheme offered by your employer.
The collapse of choice has been accompanied by a collapse in the numbers of advisers wanting to talk about personal or stakeholder pensions. The old “home service” sales forces and the tied sales forces of the unit-linked providers have been disbanded. The RDR has made mass market independent advice unviable.
The buzzwords among advisers are “platforms” “wraps” and “customer segmentation”. Look behind the jargon and the picture’s clear. Advisers want to deal with wealthy people who can pay fees from a fractional clip on the wealth managed (via wrap platforms).
With the advisory community, turning their attention, quite properly to where the money is, the insurers are building products to meet that demand. You may have difficulty buying a stakeholder pension but you’ll have no problem finding yourself a self invested personal pension sitting on a platform that can wrap your other assets (provided you are properly segmented).
The harsh reality is that the vast majority of insurers operating in the UK ten years ago were not operating viably. Most of them sit within banks such as Lloyds or specialist holding companies dubbed “Zombies”.
Some of the great hopes, most notably the Prudential, have pretty well given up on the UK (and Europe) and are looking to less heavily regulated, less consumer savvy and less intermediated markets in the Far East. A quick look at the strategies of the remaining players suggest there may be following. Last week, HSBC Life closed its doors on its ambitious plans to dominate the UK pension market
Which leaves a very small number of insurance companies active in the UK pensions market. Aviva, Royal London, Friends Life, Aegon, Zurich, Standard Life, Scottish Widows and Legal and General.
There are of course insurers who still insure, guaranteeing individual and bulk annuities, group risk benefits and individual protection products. But even the mighty Met Life, who had promised so much, are rumoured to be withdrawing from the UK.
Should we be worried about this contraction of choice. Certainly you would if your livelihood depended on the insurer’s massive spend on research and distribution. But if you are a consumer, I think the future is considerably brighter. The last men standing now have a massively growing market almost to themselves. The “almost” refers of course to NEST and the new mastertrusts and unsurprisingly the insurers are setting their own mastertrusts up to defend their territory.
The point for consumers is that the proliferation of insurers competing for distribution has proved a dreadful model for the consumer. It has resulted in a lot of rich advisers and insurance people and a lot of angry and frustrated customers.
It could not continue and , if you agree with my analysis, will not continue.
We now have a vacuum.
We’ve decided that the consumer will be provided for through the workplace and the distribution will be sem-automatic (for the people). That’s what auto-enrolment is.
We’ve set up the mechanisms and learned the rules. The remaining providers are pretty well ready.
But there is one piece of the jigsaw that is missing. Putting the 1.2m employers who are staging auto-enrolment in touch with the twelve or so mainstream auto-enrolment providers (and a good many specialists) requires a new route to market.
The good news for businesses and consumers is that without intermediation, the costs of the product has plummeted. But without guidance, the business of identifying pension providers and making a meaningful comparison has all but disappeared.
Some of our insurers are missing and the rest are hard to find
- The Regulator’s right to be cautious about mastertrusts (henrytapper.com)
- Time to look at VAT on pension costs (henrytapper.com)
- Irish Life back in private sector (independent.ie)
- Taxpayer once again the loser in Irish Life sale (independent.ie)
- Prudential: One in three workers has no pension (gateway-homes.co.uk)
- It’s a wrap trap – but who’s been caught? (henrytapper.com)
- ABI finally comes clean on pension charges (henrytapper.com)
- Jeff Salway:Many workers about to retire may lose out (scotsman.com)
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