The UK Retail Distribution Review: An Update on Provider Implementation Readiness

by Jamie Macgregor, December 27, 2012
Industry Trends


By the end of 2012, the Retail Distribution Review (RDR) will be implemented across the UK. This regulation heralds the end of commission for retail investment products, along with other changes that will seek to improve the professionalism of the industry.  This change has far-reaching effects for propositions and business models across both the distribution and product manufacturing landscapes.

In the report, The UK Retail Distribution Review: An Update on Provider Implementation Readiness, Celent examines the preparations being made by life, annuity, pension, and long-term savings product providers and provides an outlook for activity in 2013. The report provides insight from product providers in response to three questions. What have been the major challenges experienced in 2012 in preparing for RDR? What is the outlook for your programme from 2013 onwards? What, if any, are the remaining challenges?

Key findings explored in the report include:

  • All product providers declared that their RDR implementation programmes were on track to deliver by the end-of-year deadline.
  • Some product providers reported they spent more than they had planned in 2012, although often falling within acceptable contingency limits.
  • Most product providers reported that their scope had been reduced during 2012 to focus more purely on compliance with the regulation and timeline. Consequently, further propositional work is expected in 2013 to close gaps.

Furthermore, the findings indicate that RDR-related activity is likely to continue into 2013 for carry-over activity, new propositions, and further expense reduction. Most providers are anticipating that they will need to maintain a high degree of flexibility in 2013 in order to respond quickly to both market and competitive changes.

“The providers consulted as part of this study appear to be prepared for meeting the RDR compliance requirements for their existing businesses. The real test, however, is whether the choices they have made prepare them for the wider market changes that may result beyond 2013,” says Jamie Macgregor, Senior Analyst with Celent’s Insurance Group and author of the report.

“If consumers choose not to place their trust in the industry post-RDR and business volumes fall, then many providers will find themselves with a cost base that they are unable to afford. Staying relevant with the end consumer and chosen distribution channels will be essential to maintaining the viability of their long-term business models,” he adds.

This report is a thematic review based on the findings from interviewing six providers representing 30% of the long-term market in the United Kingdom (based upon total UK gross written premiums in 2010). It provides an update on the relevant regulation for RDR over the last 12 months, a reflection on 2012 programme challenges, an outlook for 2013, and a view on outstanding risks.

The report also explores potential lessons for other markets facing similar changes.

The 20-page report contains one figure.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

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Table of Contents

Executive Summary





Research Method



Target Audience


Market Update



About the Retail Distribution Review



Key Regulator Updates in 2012


Reflection in 2012



Performance Against Plan



Change Focus



Key Risks


Outlook for 2013 and Beyond



Carry-Over Activity



2013 and Beyond





Lessons to Learn


Leveraging Celent’s Expertise



Support for Financial Institutions



Support for Vendors


Related Celent Research


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