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Deposit and Savings Accounts - UK - April 2010

This report looks in detail at the retail savings market, analysing the key factors that influence the market, both at a macro level as well as the more inward-looking dynamics of how the markets have been operating during the credit crunch. Competing products like cash ISAs and equity-based investment are presented, before summarising the strengths and weaknesses in the savings market at present.

  • In November 2009, FSA regulation was extended to cover banking conduct, and as a result, providers must now give customers at least two months’ notice of any adverse interest rate changes on their accounts. Mintel's focus groups show growing resentment at low interest rates - this measure could increase switching activity.
  • PDI is the main driver of the savings market, and this has fallen during the recession as people have found themselves more stretched. Although we are now out of recession, there is still downward pressure on disposable incomes this year (potential tax rises after the election, rising inflation, a fragile economy, higher interest rates), which may impact people’s ability to save.
  • Retail savings balances increased by just 1% (£11 billion) in 2009, compared with an increase of 5% (£50 billion) in 2008, demonstrating how low interest rates and the recession have impacted both people’s willingness and ability to save. Due to the reasons above, Mintel expects 2010 to be another tough year, with savings balances remaining flat this year and rising by just 2% in 2011.
  • Consumers are looking for stability, and banks for sustainable, long-term finance. The two have combined to mean that demand for fixed rate bonds increased during the credit crunch, reversing a long-trend towards instant-access accounts.
  • Mintel’s consumer research for this report shows that the large high street banks and Nationwide dominate the UK savings market, with 19.5 million people owning a savings account (excluding cash ISAs) with one of the ‘big six’ providers.
  • Low interest rates and the impact of the recession in encouraging people to get their finances in order, has prompted some people to prioritise paying off debt at present. Our consumer research found that 23% of consumers are focusing on paying off their debts rather than saving at present, although 30% were planning to increase their savings over the next year or so.

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Table of contents

  1. Issues in the Market

      • Key issues
        • Abbreviations
        • Future Opportunities

          • Restoring trust by increasing transparency in the market
            • Increase the functionality of online account management
            • Market in Brief

              • Retail savings balances increased by just 1% in 2009
                • Figure 1: Retail savings balances outstanding*, 2002-09
              • The recession has reduced people’s ability to save…
                • …with further downward pressure on PDI expected
                  • Equity-based investment is the main alternative to cash savings
                    • The big high street providers dominate the market
                      • Figure 2: Estimated savings account market share (by volume), February 2010
                    • Savings adspend has increased during the credit crunch
                      • Online account management has boomed over the last decade
                        • Figure 3: Number of registered customers, and number of online/telephone banking transactions, by transaction type (MBBG only), 2002 and 2008
                      • Around half of all UK adults have a savings account…
                        • Figure 4: Ownership of savings, investmnets and other financial products, February 2010
                      • ABs and older people are likely to have more investible assets
                        • Figure 5: Total value of savings and investments, February 2010
                      • ABs are more rate sensitive, older people are more loyal
                      • Internal Market Environment

                        • Key points
                          • Low interest rates have helped borrowers…
                            • Figure 6: Bank of England base rate, end of quarter, Q1 1975-Q4 2009
                          • …and encouraged people to focus on paying off debt
                            • A lack of incentive for savers at present
                              • Figure 7: Average monthly quoted deposit interest rates at banks and building societies, January 2005-January 2010
                            • Credit conditions have improved slightly
                              • Figure 8: BoE base rate vs 3-month LIBOR, January 2002-January 2010
                            • Increased use of bonus rates and restrictions
                              • Greater demand for fixed-rate bonds
                                • FSA regulation has been extended to banking conduct
                                • Broader Market Environment

                                  • Key points
                                    • The recession has encouraged some people to save more…
                                      • Figure 9: Household saving ratio, seasonally adjusted, Q1 2005-Q2 2009
                                    • …although disposable incomes have been squeezed
                                      • An ageing population is not conducive to high savings rates…
                                        • Figure 10: UK population, by age bracket, 2000-15
                                      • …but growth in the AB population is a positive
                                        • Figure 11: Structure of the UK population, by socio-economic group, 2004-14
                                      • Households’ financial positions have improved of late
                                        • Figure 12: Households’ financial position, Q1 2009-Q1 2010
                                      • A focus on saving and debt repayment during the recession
                                        • Figure 13: Consumers’ intended savings, investment, borrowing and debt repayment activity, June 2002-February 2010*
                                      • ISA deposits and regular savings plan are top of the list
                                        • Figure 14: Intended cash-based saving activities, Q3/Q4 2002-Q1/Q2 2010*
                                    • Competitive Context

                                      • Key points
                                        • Cash ISA subscriptions increased significantly in 2008/09
                                          • The stockmarket rally has also encouraged investment in equities
                                            • Figure 16: FTSE 100 Index, end of month, January 1994-January 2010
                                          • Stocks and shares ISA subscriptions fell in 2008/09
                                            • Figure 17: Stocks and shares component ISA subscriptions, 2000/01-2008/09
                                        • SWOT Analysis

                                            • Figure 18: Deposit and savings accounts – SWOT analysis, 2010
                                        • Who’s Innovating?

                                          • Key points
                                            • The credit crunch has reduced levels of innovation in the market
                                              • Increased use of bonuses during the credit crunch…incentives and preferential rates…
                                                • …as well as incentive schemes and preferential rates
                                                  • …and preferential rates for existing customers
                                                    • Investec and Nationwide use average best buy rates
                                                    • Market Size and Forecast

                                                      • Key points
                                                        • Retail savings balances increased by just 1% in 2009
                                                          • Figure 19: Retail savings balances outstanding*, 2002-09
                                                        • People focusing on paying off debt rather than saving
                                                          • Building societies suffered in 2009
                                                            • Fixed-rate bonds became more popular during the credit crunch
                                                              • Figure 20: Number and value of individual interest-bearing sight and time accounts (MBBG only), 2003-08
                                                            • Almost half of the population have a non-ISA savings account
                                                              • Figure 21: Ownership of savings accounts, investments and other financial products, February 2010
                                                            • Forecast
                                                              • Figure 22: Forecast of retail savings balances outstanding*, 2005-15
                                                            • Factors used in the forecast
                                                            • Market Share

                                                              • Key points
                                                                • The big high street providers dominate the savings market
                                                                  • Figure 23: Estimated savings account market share (by volume), February 2010
                                                                • Just 5% of savers have an account with a direct bank
                                                                • Companies and Products

                                                                  • Major players
                                                                    • Barclays
                                                                        • Figure 24: Savings product range of Barclays, 2010
                                                                        • Figure 25: Financials for Barclays’ UK Retail Banking business unit, 2008 and 2009
                                                                      • HSBC
                                                                          • Figure 26: Savings product range of HSBC, 2010
                                                                          • Figure 27: Savings product range of First Direct, 2010
                                                                          • Figure 28: HSBC financials – UK Personal Financial Services, 2007 and 2008
                                                                        • Lloyds Banking Group
                                                                            • Figure 29: Savings product range of Lloyds TSB, 2010
                                                                            • Figure 30: Savings product range of HBOS, 2010
                                                                            • Figure 31: Key financial data for Lloyds TSB’s retail division, 2007 and 2008
                                                                          • Nationwide
                                                                              • Figure 32: Savings product range of Nationwide, 2010
                                                                              • Figure 33: Financials for Nationwide’s retail business segment, 2008 and 2009
                                                                            • RBS Group
                                                                                • Figure 34: Savings product range of NatWest, 2010
                                                                                • Figure 35: Savings product range of RBS, 2010
                                                                                • Figure 36: Financial data for RBS Group’s UK Retail division, 2008 and 2009
                                                                              • Santander Group
                                                                                  • Figure 37: Estimated retail market share of Santander, 2008 and 2009
                                                                                  • Figure 38: Savings product range of Santander, 2010
                                                                                  • Figure 39: Key financial data for Santander, UK, 2008 and 2009
                                                                              • Brand Communication and Promotion

                                                                                • Key points
                                                                                  • Savings adspend increased substantially during the credit crunch…
                                                                                    • Figure 40: Total finance and savings adspend, 2006-09
                                                                                  • …especially on fixed-rate bonds
                                                                                    • Figure 41: Savings adspend, by sub-category, 2007-09
                                                                                  • Adspend on instant-access accounts has fallen considerably
                                                                                    • The big banks dominate when it comes to savings adspend…
                                                                                      • Figure 42: Savings adspend, by top 20 advertisers, 2007-09
                                                                                    • …although ING Direct had the highest expenditure in 2009
                                                                                      • Press adverts accounted for half of total savings adspend in 2009
                                                                                        • Figure 43: Savings adspend, by media type, 2007-09
                                                                                    • Channels to Market

                                                                                      • Key points
                                                                                        • The branch network has shrunk over the last decade
                                                                                          • Figure 44: Number of branches of selected banks and building societies, 2002-08
                                                                                        • The changing role of the branch network
                                                                                          • Online banking transactions have risen considerably
                                                                                            • Figure 45: Number of registered customers, and number of online/telephone banking transactions, by transaction type (MBBG only), 2002 and 2008
                                                                                        • The Consumer – Product Ownership

                                                                                          • Key points
                                                                                            • Around half of UK adults have a non-ISA savings account
                                                                                              • Figure 46: Ownership of savings, investments and other financial products, February 2010
                                                                                            • Demand for fixed-rate bonds increased during the credit crunch
                                                                                              • Concentrating on the top end of the market
                                                                                                • Figure 47: Ownership of savings and investment products, by various demographics, February 2010
                                                                                            • The Consumer – Value of Savings and Investments

                                                                                              • Key points
                                                                                                • A third of people have either no, or unsubstantial savings…
                                                                                                  • Figure 48: Total value of savings and investments, February 2010
                                                                                                • …while 10% of UK adults are classed as mass affluent
                                                                                                  • Older people have a higher amount of savings and investments
                                                                                                    • Figure 49: Total value of savings and investments, by various demographics, February 2010
                                                                                                  • ABs are at least three times more likely to be mass affluent
                                                                                                  • The Consumer – Choice of Savings Provider

                                                                                                    • Key points
                                                                                                      • The big banks dominate the savings market…
                                                                                                        • Figure 50: Who people hold their savings accounts with, February 2010
                                                                                                      • …with Lloyds Banking Group being the largest provider
                                                                                                        • Broadsheet readers are likely to have an account with a direct bank
                                                                                                          • Figure 51: Who people hold their savings accounts with, by various demographics, February 2010
                                                                                                        • Affluent consumers are more likely to save with a direct bank
                                                                                                          • Nationwide customers are more likely to have investments
                                                                                                            • Figure 52: Savings, investments and other types of financial products owned, by who people hold their savings accounts with, February 2010
                                                                                                          • Nationwide savers are more affluent
                                                                                                            • Figure 53: Total value of savings and investments, by who people hold their savings accounts with, February 2010
                                                                                                        • The Consumer – Attitudes towards Saving Money

                                                                                                          • Key points
                                                                                                            • Consumers have been focusing on paying off debt
                                                                                                              • Figure 54: Attitudes towards saving money, February 2010
                                                                                                            • Interest rates are key, but accessibility is also important
                                                                                                              • Apathy still plays a part in the savings market
                                                                                                                • Men are more rate-sensitive than women
                                                                                                                  • Figure 55: Attitudes towards saving money, by various demographics, February 2010
                                                                                                                • Young people are more likely to increase their savings this year
                                                                                                                  • ABs are more likely to be ‘rate tarts’
                                                                                                                    • Equity-based investors are wealthier, but are also more savvy
                                                                                                                      • Figure 56: Attitudes towards saving money, by ownership of savings, investments and other financial products, February 2010
                                                                                                                    • Mass affluent consumers are a lot more difficult to retain
                                                                                                                      • Figure 57: Attitudes towards saving money, by total value of savings and investments, February 2010
                                                                                                                    • Nationwide and Halifax savers may be less loyal
                                                                                                                      • Figure 58: Attitudes towards saving money, by who people hold their savings accounts with, February 2010
                                                                                                                  • The Consumer – Target Groups

                                                                                                                    • Key points
                                                                                                                      • The Loyalists are most likely to have a savings account…
                                                                                                                        • Figure 59: Ownership of savings, investments and other financial products, by target groups, February 2010
                                                                                                                      • …while The Unengaged are the least likely to own one
                                                                                                                        • High earners are more likely to be Hardcore Savers
                                                                                                                          • Figure 60: Target groups, by various demographics, February 2010
                                                                                                                        • Retired people are more likely to be Loyalists
                                                                                                                          • The Loyalists are the most affluent group
                                                                                                                            • Figure 61: Total value of savings and investments, by target groups, February 2010
                                                                                                                          • Direct banks appeal more to Hardcore Savers
                                                                                                                            • Figure 62: Who people hold their savings accounts with, by target groups, February 2010
                                                                                                                          • Hardcore Savers may appeal to banks in need of retail deposits…
                                                                                                                            • Figure 63: Attitudes towards saving money, by target groups, February 2010
                                                                                                                          • …but The Loyalists are better for customer retention
                                                                                                                          • Appendix – The Consumer – Product Ownership

                                                                                                                              • Figure 64: Most popular financial products own, by demographics, February 2010
                                                                                                                              • Figure 65: Other financial products own, by demographics, February 2010
                                                                                                                          • Appendix – The Consumer – Value of Savings and Investments

                                                                                                                              • Figure 66: Total value of savings and investments, by demographics, February 2010
                                                                                                                          • Appendix – The Consumer – Choice of Savings Provider

                                                                                                                              • Figure 67: Most popular savings accounts held with, by demographics, February 2010
                                                                                                                          • Appendix – The Consumer – Attitudes towards Saving Money

                                                                                                                              • Figure 68: Most popular attitudes towards saving money, by demographics, February 2010
                                                                                                                          • Appendix –The Consumer – Target Groups

                                                                                                                              • Figure 69: Target groups, by demographics, February 2010

                                                                                                                          Companies Covered

                                                                                                                          • Abbey
                                                                                                                          • Alliance & Leicester
                                                                                                                          • APACS
                                                                                                                          • Asda Group Ltd
                                                                                                                          • Association of British Insurers
                                                                                                                          • Association of Payment Clearing Services
                                                                                                                          • Bank of America Corporation
                                                                                                                          • Bank of England
                                                                                                                          • Barclays Bank plc
                                                                                                                          • Birmingham Midshires
                                                                                                                          • Bradford & Bingley plc
                                                                                                                          • Britannia Building Society
                                                                                                                          • British Bankers' Association (BBA)
                                                                                                                          • Chelsea Building Society
                                                                                                                          • Cheltenham & Gloucester plc
                                                                                                                          • Clydesdale Bank
                                                                                                                          • Co-operative Group
                                                                                                                          • Council of Mortgage Lenders
                                                                                                                          • Dunfermline Building Society
                                                                                                                          • Financial Services Authority (The)
                                                                                                                          • First Direct
                                                                                                                          • Gfk NOP
                                                                                                                          • Google UK
                                                                                                                          • HBOS plc (Halifax Bank of Scotland)
                                                                                                                          • HSBC Private Bank (UK) Limited
                                                                                                                          • ING Direct
                                                                                                                          • John Gilbert Financial Research
                                                                                                                          • Legal & General Group PLC
                                                                                                                          • Lehman Brothers [UK]
                                                                                                                          • Lloyds Banking Group
                                                                                                                          • Nationwide Building Society
                                                                                                                          • NatWest
                                                                                                                          • Northern Rock plc
                                                                                                                          • Office for National Statistics
                                                                                                                          • Office of Fair Trading
                                                                                                                          • Portman Building Society
                                                                                                                          • Royal Bank of Scotland Group plc
                                                                                                                          • Sainsbury's Bank
                                                                                                                          • Scottish Widows Bank plc
                                                                                                                          • Tesco Plc
                                                                                                                          • Triodos Bank
                                                                                                                          • Yorkshire Bank PLC

                                                                                                                          Deposit and Savings Accounts - UK - April 2010

                                                                                                                          US $2,570.96 (Excl.Tax)