Defaqto report predicts further M&A in retail pensions sector

Defaqto’s recently published ‘Retirement Savings & Income Report 2007 – A review of the individual retail pensions market in the UK’ – predicts that the sector is set for further consolidation, coming both from acquisitions and from integration of compatible businesses.

Although many providers have posted positive sales figures since A-Day, the new pensions landscape has prompted a re-appraisal by providers of their prospects. Defaqto believes this will inevitably lead to further strategic alliances being formed, potentially leading to the domination of the market by a handful of super groups and a large number of specialist organisations.

These alliances are likely to take the form of either best fit, with regards to product range and associated distributor support levels, or, with regards to geographical market coverage and strengths.

A waterfront approach to the provision of pension and investment products from providers is becoming less viable and the provision of specialist services is now seen as the key to success. This emphasis on a more focused approach to targeting market support actually provides potential market entrants with clearer and more appealing opportunities, meaning that new niche entrants will continue to join the fray.

Whereas prior to A-Day companies had been inclined to persist with unprofitable lines in the hope of seeing some improvement, they have now been forced to rationalise their pension product range resulting in the increased valuation and sale of closed book business.

Matt Ward, Principal Consultant – Pensions and Wealth Management at Defaqto said, “It is evident that businesses are evaluating opportunities very carefully before committing themselves. This is particularly evident where new entrants are concerned. Not only are they focusing on a specific sector of the industry, they are doing so with new propositions. This can only be a healthy sign.”