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Consumers, Saving and Investing - UK - January 2011

This report examines the saving and investment market from the perspective of the consumer. It considers the wider economic context and consumer confidence and examines what impact this will have on consumer attitudes towards saving. Product ownership and the level of savings held are assessed and the frequency and the approach taken to saving are also considered. General attitudes towards saving and investing and the main barriers to saving activity are also analysed.

  • Despite the continuing economic uncertainty more than a third of adults lack a financial safety net, holding less than £500 in savings.
  • Almost 40% expect to increase the amount they save over the next 12 months – with under-35s among the most likely to be planning to save more.
  • In the low interest rate environment, saving tends to be a precautionary rather than speculative activity – those with a significant financial cushion are the least likely to consider adding increase saving over the next year.
  • As consumers struggle in a difficult economic climate, more than half withdrew from their savings during the last 12 months.
  • Around a fifth of adults are prioritising debt repayment over saving activity, with many doing so because of an unfavourable savings climate rather than a pressing need to clear debts.
  • Financial health is linked to the approach taken to saving – the most financially confident are more likely to pay in a set amount or whatever is left over each month, while strugglers are tend to save on an adhoc basis.

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Table of contents

  1. Issues in the Market

      • Key issues
        • Abbreviations
        • Future Opportunities

            • Encouraging savers to break away from the herd
              • Saving in order to deliver a sense of well being
              • Market in Brief

                • Recession led to increased focus on saving activity…
                  • Figure 1: Saving ratio, Q1 2005-Q3 2010
                • …but economic conditions are placing savers under pressure
                  • Stockmarket growth boosts investment market
                    • Investment sales and retail savings balances increase in 2010
                      • Consumers remain cautious about finances
                        • Figure 2: Current financial situation, December 2010
                      • Cash-based savings lead the way
                        • Figure 3: Saving and investment product ownership, December 2010
                      • Almost a third are without a financial safety net
                        • 50% of savers contribute on a monthly basis
                          • Figure 4: Frequency of saving/investing, December 2010
                        • Around a quarter pay in a set amount each month
                          • Figure 5: Approach to saving and investing, December 2010
                        • More than 40% are curbing saving activity to meet everyday expenses
                          • Figure 6: Main barriers to saving and investing, December 2010
                        • Two fifths expect to increase amount saved during 2011
                          • Figure 7: Attitudes towards saving and investing, December 2010
                      • Economic Context

                        • Key points
                          • Economic uncertainty has encouraged saving activity
                            • Figure 8: GDP, PDI, consumer expenditure and savings, at current prices, 2005-15
                          • Saving activity slowed during the latter part of 2010
                            • Low interest rates undermine the incentive to save
                              • Figure 9: Bank base rate and quoted household rates (%) for savings accounts, January 2000-November 2010
                            • Debate over the direction of interest rates
                              • Rising inflation bites into saving and investment returns
                                • Figure 10: Average annual changes in the bank base rate, RPI and CPI – UK, 2000-10
                              • Pressure on wages will limit savings in 2011
                                • Figure 11: Monthly change in RPI and average weekly earnings, 2005-10
                              • Stockmarket growth fuels investor confidence
                                • Figure 12: FTSE 100 and FTSE All-Share indices, quarterly, November 2004-November 2010
                              • Paying off debt remains a financial priority
                                • Figure 13: Outstanding lending to individuals, Q2 1993-Q3 2010
                            • Consumer Context

                              • Key points
                                • Consumer confidence remains subdued
                                  • Figure 14: Monthly, 3-monthly and 12-monthly UK consumer confidence indices, January 1997-December 2010
                                • Most people are managing to get by…
                                  • Figure 15: Current financial situation, December 2010
                                • …but only around a fifth regard their financial situation as healthy
                                  • Two fifths believe their financial situation worsened in 2010
                                    • Figure 16: Financial situation compared to 12 months ago, December 2010
                                  • Concerns about future prospects have risen
                                    • Figure 17: Trends in consumer sentiment about personal financial situation over the next 12 months, December 2009-December 2010
                                  • Good financial intentions for 2011...
                                    • Figure 18: Financial priorities over the previous year and coming year, December 2010
                                  • ...but there is still room for enjoyment as well
                                    • Saving and investment activity is top financial priority
                                      • Figure 19: Savings, investment, borrowing and debt repayment – consumers’ expected activity, by quarter, Q3/Q4 2002-Q3/Q4 2010
                                    • Age group changes will alter the shape of the market
                                      • Figure 20: Trends in the age structure of the UK population, 2005-15
                                    • Changes for children’s saving products
                                    • SWOT Analysis

                                        • Figure 21: Consumers – Saving and Investing – SWOT analysis, 2011
                                    • Retail Saving and Investment Environment

                                      • Key points
                                        • Retail deposits show slight growth
                                          • Figure 22: Retail savings balances outstanding*, 2002-10
                                        • Switching to ISAs, regular savings and fixed-rate bonds
                                          • Figure 23: Types of savings accounts held, 2006-10
                                        • Appetite for equity-based savings continues to decline
                                          • Figure 24: Ownership of stocks and shares, government stock, unit trusts or investment trusts, 2003-10
                                        • Investment sales decline but there are some growth areas
                                          • Figure 25: Volume of sales for selected investment products, 2005/06-2009/10
                                        • Depositor protection increases to £85,000
                                        • Saving and Investment Ownership

                                          • Key points
                                            • Note on consumer research
                                              • There remains a clear preference for cash-based savings
                                                • Figure 26: Saving and investment product ownership, December 2010
                                              • Almost 60% are opposed to taking risks with savings and investments
                                                • Figure 27: Responses to statement ‘I don’t like to take any risks with my savings/investments’, December 2010
                                              • Financially secure are more likely to consider investment products
                                                • Figure 28: Saving and investment product ownership, by current financial situation, December 2010
                                              • Most people support the concept of saving and investing
                                                • Figure 29: Repertoire of saving and investment account/product ownership, December 2010
                                              • Product complexity increases along with number of products held
                                                • Figure 30: Saving and investment product ownership, by repertoire of saving and investment product ownership, December 2010
                                              • Cross-ownership of saving and investment products is common
                                                • Figure 31: Cross-analysis of saving and investment product ownership, December 2010
                                              • Multiple account ownership is also fairly common
                                                • Figure 32: Saving and investment product ownership, December 2010
                                            • Level of Savings and Investments Held

                                              • Key points
                                                • More than a third have less than £500 in savings
                                                  • Figure 33: Level of investible assets, December 2010
                                                • Savings levels rise with age
                                                  • Figure 34: Level of investible assets, by age, December 2010
                                                • Wealthier people hold a wider range of products
                                                  • Figure 35: Saving and investment product ownership, by amount of investible assets, December 2010
                                                • Higher savers are more likely to spread the risk
                                                  • Figure 36: Repertoire of saving and investment product ownership, by amount of investible assets, December 2010
                                                • Financial wellbeing through saving and investing
                                                  • Figure 37: Current financial situation, by saving and investment product ownership, December 2010
                                                • Future confidence linked to level of savings and investments
                                                  • Figure 38: Financial outlook over the next 12 months ago, by level of investible assets, December 2010
                                              • Frequency of Saving and Investing

                                                • Key points
                                                  • Almost 50% of savers add to their funds on a monthly basis
                                                    • Figure 39: Frequency of saving/investing, December 2010
                                                  • A third are more infrequent savers
                                                    • For some saving accumulation is no longer a priority...
                                                      • ...but inactive savers may still have considerable investible wealth
                                                        • Figure 40: Amount of investible assets, by frequency of saving/investing, December 2010
                                                      • Regular savers feel more financially secure…
                                                        • Figure 41: Current financial situation, by frequency of saving/investing, December 2010
                                                      • …and are more confident about the future
                                                        • Figure 42: Financial situation over the next year, by frequency of saving/investing, December 2010
                                                    • Approach to Saving and Investing

                                                      • Key points
                                                        • Only a quarter of savers pay in a set amount each month
                                                          • Figure 43: Approach to saving and investing, December 2010
                                                        • Savings right at the top of priorities
                                                          • Figure 44: What consumers choose to spend extra money on, December 2010
                                                        • Full-time employment and affluence underpins planned saving activity
                                                          • Figure 45: Demographic overview of approach to saving and investing, December 2010
                                                        • Impromptu savers are more likely to save infrequently
                                                          • Figure 46: Frequency of saving/investing, by approach to saving and investing, December 2010
                                                        • Accumulating a lump sum is linked to investment ownership
                                                          • Figure 47: Saving and investment product ownership, by approach to saving and investing, December 2010
                                                        • Ad hoc savers are more likely to have lower level of savings
                                                          • Figure 48: Amount of investible assets, by approach to saving and investing, December 2010
                                                        • Planned saving may help to deliver financial health
                                                          • Figure 49: Approach to saving and investing, by current financial situation, December 2010
                                                        • Informal savers are less likely to be confident about the next 12 months
                                                          • Figure 50: Financial situation over the next year, by approach to saving and investing, December 2010
                                                      • Barriers to Saving and Investing

                                                        • Key points
                                                          • Everyday expenses are the main barrier to saving activity
                                                            • Figure 51: Main barriers to saving and investing, December 2010
                                                          • Balancing saving with low interest rates and debt repayment
                                                            • Current accounts may provide more attractive home for excess funds
                                                              • Obstacles to saving vary with age
                                                                • Figure 52: Demographic overview of barriers to saving and investing, December 2010
                                                              • Low interest rates are primarily a concern for the financially assured
                                                                • Figure 53: Current financial situation, by main barriers to saving and investing, December 2010
                                                              • Debt repayment is not just the domain of financial strugglers
                                                                • Helping people to budget could increase saving activity
                                                                  • Figure 54: Financial situation over the next year, by main barriers to saving and investing, December 2010
                                                                • Saving barriers are influenced by level of investible wealth
                                                                  • Figure 55: Amount of investible assets, by main barriers to saving and investing, December 2010
                                                              • Attitudes Towards Saving and Investing

                                                                • Key points
                                                                  • Only 40% expect to increase saving over the next 12 months
                                                                    • Figure 56: Attitudes towards saving and investing, December 2010
                                                                  • Under-35s are much more likely to plan to increase amount saved
                                                                    • Figure 57: Agreement with the statement ‘I am going to increase the amount I save in the next 12 months’, by age, December 2010
                                                                  • Saving to provide security
                                                                    • 50% have withdrawn from their savings over the last year
                                                                      • Lower income groups and over-55s are more likely to make withdrawals
                                                                        • Figure 58: Proportion of people who agree they have withdrawn from savings over the last 12 months, by household income, December 2010
                                                                      • Saving barriers will not necessarily prevent increased saving activity
                                                                        • Figure 59: Attitudes towards saving and investing, by main barriers to saving and investing, December 2010
                                                                      • High-balance savers are the least likely to be planning to add to funds
                                                                        • Figure 60: Attitudes towards saving and investing, by level of investible assets, December 2010
                                                                      • Appetite for risk is not influenced by current financial health
                                                                        • Figure 61: Agreement with attitudes towards saving and investing, by current financial situation, December 2010
                                                                      • People looking to increase saving are more likely to save spare cash
                                                                        • Figure 62: Approach to saving and investing, by agreement with attitudes towards saving and investing, December 2010
                                                                    • Appendix – Consumer Context

                                                                        • Figure 63: Current financial situation, by demographics, December 2010
                                                                        • Figure 64: Financial situation compared to 12 months ago, by demographics, December 2010
                                                                    • Appendix – Saving and Investment Ownership

                                                                        • Figure 65: Saving and investment product ownership, by demographics, December 2010
                                                                        • Figure 66: Repertoire of saving and investment product ownership, by demographics, December 2010
                                                                    • Appendix – Level of Savings and Investments Held

                                                                        • Figure 67: Amount of investible assets, by demographics, December 2010
                                                                    • Appendix – Frequency of Saving and Investing

                                                                        • Figure 68: Frequency of saving/investing, by demographics, December 2010
                                                                    • Appendix – Approach to Saving and Investing

                                                                        • Figure 69: Approach to saving and investing, by demographics, December 2010
                                                                    • Appendix – Barriers to Saving and Investing

                                                                        • Figure 70: Main barriers to saving and investing, by demographics, December 2010
                                                                    • Appendix – Attitudes Towards Saving and Investing

                                                                        • Figure 71: Agreement with attitudes towards saving and investing, by demographics, December 2010

                                                                    Companies Covered

                                                                    • Aldi Stores Ltd (UK & Ireland)
                                                                    • Asda Group Ltd
                                                                    • Bank of England
                                                                    • British Sky Broadcasting Group plc (BSkyB)
                                                                    • Building Societies Association
                                                                    • Co-operative Group
                                                                    • Financial Services Authority (The)
                                                                    • Freeview
                                                                    • Gfk NOP
                                                                    • Government Actuary's Department (GAD)
                                                                    • Grupo Santander Central Hispano S.A.
                                                                    • ING Direct
                                                                    • J. Sainsbury
                                                                    • John Gilbert Financial Research
                                                                    • Kantar Media
                                                                    • Lidl (UK)
                                                                    • Lloyds TSB Insurance
                                                                    • London Stock Exchange plc
                                                                    • Marks & Spencer
                                                                    • mmO2 plc
                                                                    • National Savings & Investments
                                                                    • Netto Foodstores Ltd
                                                                    • Orange plc (UK)
                                                                    • T-Mobile (UK) Ltd
                                                                    • Tesco Plc
                                                                    • Virgin Media Ltd
                                                                    • Virgin Mobile
                                                                    • Vodafone Group Plc (UK)
                                                                    • Waitrose
                                                                    • Wm Morrison Supermarkets

                                                                    Consumers, Saving and Investing - UK - January 2011

                                                                    £2,195.00 (Excl.Tax)