ReportsnReports add new market research report to its vast collection. Wealthy individuals have diverse retirement finance needs. This report assesses wealthy consumers and the pension products they use. It contains analysis of the proposed tax and pension contribution changes that will affect wealthy individuals. The report gives forecasts of how pensions will grow and how competitors can win in the retirement planning wealth market.
Features and benefits
- Identify and effectively target HNW consumers whose expansive lifestyles require much greater levels of income in retirement.
- Enhance knowledge of how tax developments either inhibit or encourage HNWs in to saving towards retirement through a pension plan.
- Provides analysis of the key at-retirement products for HNWs, including how the economic climate will affect demand for them.
- Key competitor benchmarking analysing how insurers compare to non-insurers in terms of the average wealth they attract to their pension schemes.
Highlights
Wealthy individuals are a non-standard consumer segment and form a minority of the population. In the UK there are approximately 9.5 million affluent individuals with £30,000 or more in liquid assets, accounting for 20% of the adult population.
Wealthy individuals characteristically have a wide portfolio of investments, designed to meet specific needs, such as aggressive growth, tax minimization or protection. The customer can elect to have a high level of self-control or can choose to have their portfolios wholly managed on their behalf.
Wealthy individuals in the UK who want to invest in private pensions do so using self-invested personal pensions (SIPPs). SIPPs are mostly sold through channels offering high quality advice to clients and are especially suitable retirement vehicles for the wealthy as they offer more facilities than a personal pension.
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Report Details:
No. of Pages: 57
Your key questions answered
- How advisors and providers can effectively align their business structure to adapt to changing consumer needs in the current economic climate.
- Identify threats that face HNW clients in 2012. Analysing how and why consumers are delaying retirement despite commanding significant wealth.
- Identify which retirement products providers should focus on with regards to innovation, taking in to account HNWs optimum risk exposure.
OVERVIEW
Catalyst
Summary
EXECUTIVE SUMMARY
The UK affluent market continues to grow and held £1,521bn in liquid assets in 2011
Wealthy individuals are redefining retirement, and tax developments look set to make this harder
There are specialist pensions for affluent individuals, but winning in wealth requires different actions from market players
THE WEALTHY UK CUSTOMER
Introduction
Datamonitor’s Global Wealth Model sizes the UK affluent population as holding £2,630bn in liquid assets in 2011
Datamonitor has set specific wealth thresholds for segmenting affluent consumers
In the UK, wealthy individuals account for only 20% of the population
Mass affluent individuals hold a larger volume of wealth than HNWs
UK HNW consumers are mostly aged 51 and above
The majority of UK HNW investors amassed their wealth through earned income
The number of affluent individuals and the value of their assets will rise through to 2015
The needs of the UK wealthy and the structure of the market influence the choice of retirement solutions
There is high demand for financial, tax, and inheritance planning among UK HNWs
Pensions savings constitute a proportion of the wealthy’s investment portfolio
KEY ISSUES FOR THE WEALTHY CUSTOMER
Introduction
The wealthy are redefining their retirement with specific requirements for financing it
Retirement age has become irrelevant for wealthy individuals who are planning to work longer
Increasing life expectancy will alter needs for financing retirement
UK HNWs are finding it difficult to predict the rate of return on investments when planning for retirement
Succession issues will become more complex due to wealthy individuals’ changing perceptions of retirement
Tax developments look set to have a significant impact on wealthy individuals
HNWs will have a greater need for alternative investments due to the tax treatment of funds in excess of the lower lifetime allowance
High earners will pay 50% income tax and receive no tax-free personal allowance
HMRC has taken a tough stance on individuals avoiding tax through undeclared offshore assets
Tax loopholes used to avoid stamp duty on expensive properties have been closed
Financial advisors to the wealthy are facing their own challenges from the Retail Distribution Review
Wealth managers are willing to market themselves as “restricted” if it will draw attention to the core focus of their operations
Most wealth managers are already fully or mostly fee-focused, but some strong concerns remain
RETIREMENT PLANNING PRODUCTS FOR THE WEALTHY
Introduction
The “ideal” retirement investment for wealthy individuals must fulfill five requirements
The investment flexibility afforded by self-invested personal pensions will ensure the product’s continuing popularity among the wealthy
SIPPs have a much wider investment remit than a personal pension
Non-insurance companies are attracting wealthier clients to SIPPs than insurance companies
Insured SIPPs new business is reaching a plateau
Wealthier customers may be concerned that their “full SIPPs” are not cost effective
The SIPP market may contract through consolidation as capital adequacy standards heighten
SIPPs and wraps look set to grow in tandem
Small self-administered schemes will be considered more favorably in the future
Affluent employees have specific reasons to consider SSASs over SIPPs
Directors and executives can choose from four types of SSAS products from insurance companies
The SSAS market is currently in steep decline, with fewer operators in the market compared to SIPPs
Datamonitor believes that although the RDR will give SSASs a chance to be considered they will not be as popular as SIPPs
Executive pension plans will continue to have a clear appeal over SSASs for those working at a senior level
Controlling directors face different restrictions on their pension allowances
The level of employees that can use EPPs is not restricted
The market for EPPs has declined sharply following A-Day
The EPP market is expected to die out as the advantages of the product have been undermined since pensions simplification
Group SIPPs have the potential to change the dynamics of the group pension market
HNWs will use hedge funds, venture capital trusts, capital protected products, and investment bonds for retirement planning
Innovative wealth solutions stem from a demand for greater diversity
Venture capital trusts are high-risk but tax efficient for HNWs
Hedge funds offer HNWs the potential to gain absolute returns from their investments
Capital protected products offer wealthy individuals peace of mind from volatility in stock market performance
Investment bonds are an attractive option, but HNWs will be remain wary of using the product
Collectables have become much more popular with HNWs in the wake of the financial crisis
Although the clampdown on secrecy reduced the appeal of offshore investments, they are still used extensively by wealthy individuals
Winning in wealth requires different actions from providers, advisors, and wealth specialists
Providers must think of pensions as a piece of the retirement jigsaw for wealthy individuals
Advisors and intermediaries are in a strong position to provide advice and action for changing tax treatments of the wealthy
Wealth specialists already offer the optimal solution of a retirement package but need to improve on tax expertise
APPENDIX
Definitions
Affluent
High net worth (HNW)
Liquid assets
Mass affluent
Self-invested personal pensions (SIPPs)
Methodology: Global Wealth Model
The UK base model
Forecasting methodology
Further reading
Ask the analyst
Disclaimer
List Of Tables
Table: Number of wealthy individuals in the UK (000s) by liquid asset band, 2007–11
Table: Total liquid assets of wealthy individuals (£m) by liquid asset band, 2007–11
Table: Forecast total liquid assets of wealthy individuals (£bn) by liquid asset band, 2011e–15f
Table: New premium income in insured SIPPs (£m), 2007–11
Table: New premium income for SSASs (£m), 2007–11
Table: Number of SSAS plans and value of assets under management, by provider, March 2012
Table: Forecast new premium income (spent on life and pensions products) for SSASs (£m), 2012f–16f
Table: New premium income for EPPs (£m), 2007–11
Table: Forecast new premium income (spent on life and pensions products) for EPPs (£m), 2012f–16f
