THE JURY'S OUT! A 50/50 SPLIT IN CONFIDENCE AS TO WHETHER STAKEHOLDER PENSIONS WILL PROVE A SUCCESS

A significant proportion of UK life and pension providers do not believe that stakeholder pensions will be a success, reveals a major new research report today. Legislative issues including the introduction of stakeholder pensions have already had a dramatic effect on the insurance industry and many providers are reviewing the way they do business in order to bring down costs in response to shrinking margins and the tough business climate.

The report, Issues Affecting IT Deployment in the UK Insurance Sector, was commissioned by leading IT services provider CGI Group Europe Ltd. The research was carried out in March 2002, by independent research company Metrica, with 100 major UK-based general insurers and life & pension companies both by telephone and face-to-face interviews.

The report identified that only half (50%) of the life and pension companies interviewed believe that stakeholder pensions will be a success -- a considerable lack of endorsement for the initiative. Significantly, the introduction of stakeholder pensions has already affected business for 84% of those interviewed, the main effects being increased pressure to reduce management charges on other financial products and a greater focus on alternative selling methods such as online worksite marketing and call centres.

With the pressure to reduce management charges on other financial products, the insurance industry is now more competitive than it ever has been and the effects could be huge. According to one respondant, “Stakeholder will probably shake out some of the weaker players in the industry,” while another commented, “I suspect it will result in quite a bit of consolidation”.

Gavin Chapman, managing director at CGI Group Europe Ltd, comments on the survey, “The evidence from the report is clear. Legislative issues including the introduction of stakeholder schemes is forcing life & pension insurers to examine the way they do business in order to become more cost-effective. CGI believes that organisations must look at alternative, more cost-effective, ways of selling insurance products if they are to cope with the huge amount of flux in the market.”

He concludes, “Irrespective of the success or failure of stakeholder pensions, the 1% world will continue to be an enforced reality for which insurers must be prepared”.

Copies of the research report, Issues Affecting IT Deployment in the UK Insurance Sector, can be obtained by contacting Emma Howell on 01438 317966 or emma.howell@cgi.com.

About CGI
Founded in 1976, CGI is the fourth largest independent information technology services firm in North America, based on its headcount of more than 13,700 professionals. CGI's annualized revenue run-rate totals US$1.3 billion (CDN$2.1 billion). CGI's order backlog currently totals
US$5.75 billion (CDN$9.1 billion). CGI provides end-to-end IT services and business solutions to more than 3,000 clients worldwide from more than 60 offices. CGI's shares are listed on the NYSE (GIB) and the TSE (GIB.A). They are included in the TSE 100 Composite Index as well as the S&P/TSE Canadian Information Technology and Canadian MidCap Indices.
Website: www.cgi.com.

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