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Deposit and Savings Accounts - UK - April 2011

It is the precautionary motive that dominates savers’ thoughts in the current climate. Those consumers saving for emotional security will value personalised service, regular contact from the savings provider and a simple customer queries service more than most.

  • Despite people's good intentions and the increase in the savings ratio, the value of outstanding retail deposits has seen only minimal growth over the last few years. Some people are saving, but others are being forced to dip into those savings.
  • Mintel forecasts show that as the economy starts to recover, savings balances should start to grow. By 2015, Mintel forecasts a 16% increase in balances - although once inflation is taken into account, the real value of the market will effectively remain flat.
  • The growing need for people to save for education expenses opens up new opportunities for providers, with accounts designed specifically for this purpose potentially attracting parents who are keen to give their university-bound children a head start.
  • Most saving is short-term. The biggest reason for setting money aside is in case of emergencies, or to meet household bills and expenses.
  • The short-term nature of these saving objectives is one of the reasons that interest rates are only a minor concern for many people. Just 15% say that it's not worth saving because rates are too low.
  • Price comparison sites are starting to play a significant role in the market, but they are far less important than in, say, the general insurance market. Only 6% of adults say they use aggregators to research the best rates on savings accounts.

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • The Market
            • Retail savings balances have marginally increased
              • Some scope for growth in the coming years
                • Figure 1: Forecast of outstanding retail savings balances, 2005-15
              • Short-term savings top the list of financial priorities for 2011
                • Market Factors
                  • Saving intentions will face financial realities
                    • Worried consumers will sit and wait
                      • Surge in online banking registrations at major retail banks
                        • Companies, Brands and Innovation
                          • Santander stands out from the crowd
                            • Figure 2: Attitudes towards and usage of deposit and savings account brands, January 2011
                          • Share of Big Six remains relatively unchanged
                            • Figure 3: Proportion of savers holding an account with the leading players, February 2011
                          • Adspend grew in 2010 and 2011 will be a competitive year
                            • The Consumer
                              • Savings accounts held by four fifths of the adult population
                                • Figure 4: Consumers without any savings, by age, February 2011
                              • Climbing the savings ladder
                                • Better to save, or to clear debts?
                                  • Security, retirement, and education
                                    • What we think
                                    • Issues in the Market

                                        • What is currently motivating people to save?
                                          • How are price comparison sites affecting the market?
                                            • Are low interest rates stopping people from saving?
                                              • How can different consumer groups be tempted to increase savings?
                                              • Future Opportunities

                                                • Proving credentials in the savings market
                                                  • Certainty in an uncertain world
                                                  • Internal Market Environment

                                                    • Key points
                                                      • Savings ratio still up on pre-recession levels...
                                                        • Figure 5: Household saving ratio (% of Post Tax Income), seasonally adjusted, 2006-10
                                                      • ... but is forecast to remain flat in 2011
                                                        • Reduced household incomes affect savings ability
                                                          • Low base rate hits savings for millions
                                                            • Figure 6: bank of England base rate, end of quarter, Q1 1975-Q4 2010
                                                          • …and are hitting margins
                                                            • Figure 7: Average monthly quoted deposit interest rates at banks and building societies, January 2004-January 2011
                                                          • Short-term savings top the list of financial priorities for 2011…
                                                            • …but fixed term accounts are tempting many
                                                              • Consumers’ intentions... and reality
                                                                • Market still ruled by confusing number of products
                                                                  • Interest in ISAs at new high
                                                                    • Relaunch of inflation-beating NS&I bonds
                                                                      • Further changes
                                                                        • New ISA transfer times
                                                                        • Broader Market Environment

                                                                          • Key points
                                                                            • UK households are still concerned with paying off debt
                                                                              • Fourth quarter GDP figures show negative growth
                                                                                • Figure 8: GDP quarterly percentage change, Q1 2004-Q4 2010
                                                                              • Unemployment falls back in February, but remains high
                                                                                • Figure 9: Unemployment rate, UK, January 2000-February 2011
                                                                              • UK consumer confidence at alarming low
                                                                                • Figure 10: Gfk NOP Consumer Confidence Index, January 1988-February 2011
                                                                              • UK’s aging population means fewer people actively saving
                                                                                • Figure 11: Trends in the age structure of the UK population, 2005-15
                                                                              • Prosperity increasing in the long term
                                                                                • Figure 12: Forecast adult population trends, by socio-economic group, 2005-15
                                                                              • Improved consumer advice needed
                                                                                • Rebuilding retail banking at times of turmoil – a golden opportunity?
                                                                                  • An advice gap opening
                                                                                  • Competitive Context

                                                                                    • Key points
                                                                                      • Healthy rise in ISA deposits in 2010
                                                                                        • Figure 13: ISA sales, by type of ISA, 2003/04-2009/10
                                                                                      • Call for investment as stock market grows
                                                                                        • Figure 14: FTSE-100 Index, end of month, January 1994-January 2011
                                                                                      • Current account balances forecast to grow further
                                                                                      • SWOT Analysis

                                                                                          • Figure 15: Deposit and savings accounts – SWOT Analysis, 2011
                                                                                      • Who’s Innovating?

                                                                                        • Key points
                                                                                          • A new way of banking emerges after the recession
                                                                                            • NatWest makes a play to become a consumer champion
                                                                                              • ... and others are following
                                                                                                • Supermarkets have entered the fixed bonds market
                                                                                                • Market Size and Forecast

                                                                                                  • Key points
                                                                                                    • Retail savings balances have marginally increased
                                                                                                      • Figure 16: Retail savings balances outstanding, 2003-10
                                                                                                    • Compared to previous years’ growth, savings are flat in 2010
                                                                                                      • People focusing on paying off debt rather than saving
                                                                                                        • Banks and building societies battle for top online savings rates
                                                                                                          • Consumers shifting funds into notice accounts
                                                                                                            • Figure 17: Number and value of individual interest-bearing sight and time accounts (MBBG* only), 2003-09
                                                                                                          • Ever more money being put away in ISAs
                                                                                                            • Figure 18: Number of cash ISA* accounts and the value of gross subscriptions, by tax year, 2002/03-2009/10
                                                                                                          • Building societies recover strongly in 2010
                                                                                                            • Figure 19: Cash ISA balances outstanding, 2003-10
                                                                                                          • Forecast
                                                                                                            • Savings balances should return to growth…
                                                                                                              • Figure 20: Forecast of outstanding retail savings balances, 2005-15
                                                                                                            • …but in real terms, values will see little change
                                                                                                              • Figure 21: Forecast of outstanding retail savings balances, 2005-15
                                                                                                            • Forecast methodology
                                                                                                            • Market Share

                                                                                                              • Key points
                                                                                                                • Lloyds banking group dominates the savings market
                                                                                                                  • Figure 22: Savings account ownership, by provider, February 2011
                                                                                                              • Companies and Products

                                                                                                                • Barclays
                                                                                                                  • HSBC
                                                                                                                    • Lloyds Banking Group
                                                                                                                      • Nationwide
                                                                                                                        • RBS Group
                                                                                                                          • Santander
                                                                                                                          • Brand Communication and Promotion

                                                                                                                            • Key points
                                                                                                                              • In 2010, adspend grew, and 2011 will be a competitive year
                                                                                                                                • Surge in cash ISAs represents a shift in mindset.
                                                                                                                                  • Figure 23: Total savings adspend, segmented by minor brand category, 2007-08/2009-10
                                                                                                                                • The big banks continue to dominate when it comes to savings adspend...
                                                                                                                                  • ... but building societies have entered the race
                                                                                                                                    • Figure 24: Top 20 advertisers in savings, 2006-07/2009-10
                                                                                                                                  • Press and TV represent two biggest categories of savings adspend
                                                                                                                                    • Figure 25: Total adspend on savings by media type, 2006-07/2009-10
                                                                                                                                • Brand Research

                                                                                                                                  • Brand map
                                                                                                                                      • Figure 26: Attitudes towards and usage of deposit and savings account brands, January 2011
                                                                                                                                    • Brand attitudes
                                                                                                                                      • Figure 27: Attitudes by deposit and savings account brand, January 2011
                                                                                                                                    • Brand personality
                                                                                                                                      • Figure 28: Deposit and savings account brand personality – macro image, January 2011
                                                                                                                                      • Figure 29: Deposit and savings account brand personality – micro image, January 2011
                                                                                                                                    • Correspondence analysis
                                                                                                                                      • Brand experience
                                                                                                                                        • Figure 30: Deposit and savings account brand usage, January 2011
                                                                                                                                        • Figure 31: Satisfaction with various deposit and savings account brands, January 2011
                                                                                                                                      • Brand consideration
                                                                                                                                        • Figure 32: Consideration of deposit and savings account brands, January 2011
                                                                                                                                      • Brand momentum
                                                                                                                                        • Figure 33: Consumer perceptions of current deposit and savings account brand performance, January 2011
                                                                                                                                      • Net promoter score
                                                                                                                                        • Figure 34: Deposit and savings account brand recommendation – Net Promoter Score, January 2011
                                                                                                                                      • Brand index
                                                                                                                                        • Figure 35: Deposit and savings account brand index, January 2011
                                                                                                                                        • Figure 36: Deposit and savings account brand index vs. recommendation, January 2011
                                                                                                                                      • Target group analysis
                                                                                                                                        • Figure 37: Target groups, January 2011
                                                                                                                                        • Figure 38: Deposit and savings account brand usage, by target groups, January 2011
                                                                                                                                      • Group One – The Conformists
                                                                                                                                        • Group Two – Simply the Best
                                                                                                                                          • Group Three – Shelf Stalkers
                                                                                                                                            • Group Four – Habitual Shoppers
                                                                                                                                              • Group Five – The Individualists
                                                                                                                                              • Channels to Market

                                                                                                                                                • Key points
                                                                                                                                                  • 2011 should see fewer bank closures than in previous years
                                                                                                                                                    • Figure 39: UK bank and building society combined branch networks, 1998-2009
                                                                                                                                                  • Surge in online banking registrations at major retail banks
                                                                                                                                                    • Figure 40: Number of personal customers registered to access accounts by telephone and computer (MBBG only), 2002-09
                                                                                                                                                  • Key points
                                                                                                                                                    • Four in five have some form of savings
                                                                                                                                                      • Figure 41: Savings product ownership, February 2011
                                                                                                                                                    • Young adults are savings-deprived
                                                                                                                                                      • Figure 42: Consumers without any savings, by age, February 2011
                                                                                                                                                      • Figure 43: Consumers without any savings, by annual household income, February 2011
                                                                                                                                                    • All age groups equally likely to have cash-based investment
                                                                                                                                                      • Older, wealthier consumers taking advantage of the stock market
                                                                                                                                                        • Lower incomes invest in savings with instant access
                                                                                                                                                          • Premium Bonds – it could be you
                                                                                                                                                            • Saving among singles
                                                                                                                                                              • The ‘big six’ continue to dominate
                                                                                                                                                                • Figure 44: Companies with which savings accounts are held, February 2011
                                                                                                                                                                • Figure 45: Companies with which savings accounts are held, by demographics, February 2011
                                                                                                                                                            • Repertoire Analysis

                                                                                                                                                              • Key points
                                                                                                                                                                • Savings are embraced by the majority
                                                                                                                                                                  • Figure 46: Repertoire of financial product ownership, February 2011
                                                                                                                                                                • Married couples and high earners more likely to own multiple types of savings products
                                                                                                                                                                  • Figure 47: Repertoire of savings product ownership, by demographics, February 2011
                                                                                                                                                                • Saving generally begins with an instant access account…
                                                                                                                                                                  • Figure 48: Savings product ownership, by repertoire of savings product ownership, February 2011
                                                                                                                                                                • … followed by a cash ISA
                                                                                                                                                                  • NS&I products suit a variety of needs and demographic groups
                                                                                                                                                                    • Locking assets away and investing with risk reserved for those with a variety of savings products
                                                                                                                                                                      • Santander attracting those with a wide range of holdings
                                                                                                                                                                        • Figure 49: Market position of the ‘big six’, by repertoire of savings product ownership, February 2011
                                                                                                                                                                      • Owners of five or more types of product more likely to be saving for emotional security
                                                                                                                                                                      • Attitudes Towards Saving

                                                                                                                                                                        • Key points
                                                                                                                                                                          • One quarter are paying off debts/mortgage…
                                                                                                                                                                            • Figure 50: Attitudes towards saving, February 2011
                                                                                                                                                                          • ...but the same proportion hope to boost their savings
                                                                                                                                                                            • Inertia still a powerful force in the market
                                                                                                                                                                              • The scope to shift savings online
                                                                                                                                                                                • Young adults eager to save
                                                                                                                                                                                  • Figure 51: Attitudes towards saving, by demographics, February 2011
                                                                                                                                                                                • High earners looking to add to their savings...
                                                                                                                                                                                  • ...but others are struggling to find spare cash
                                                                                                                                                                                    • Interest rates are a non-issue for many
                                                                                                                                                                                      • Over-55s and high earners are most likely to chase rates
                                                                                                                                                                                        • Figure 52: Attitudes towards online management of savings, researching and moving savings to obtain best rates, by age, February 2011
                                                                                                                                                                                        • Figure 53: Attitudes towards online management of savings, researching and moving savings to obtain best rates, by socio-economic group, February 2011
                                                                                                                                                                                      • Online banking does not necessarily translate to frequent switching
                                                                                                                                                                                        • Apathy amongst consumers without savings
                                                                                                                                                                                          • Figure 54: Attitudes towards saving, by consumers without savings, February 2011
                                                                                                                                                                                        • Price comparison sites popular amongst stock market investors
                                                                                                                                                                                          • Figure 55: Attitudes towards online management of savings, researching and moving savings to obtain best rates, by type of savings product owned, February 2011
                                                                                                                                                                                        • Aggregators could be key to winning fixed-rate business
                                                                                                                                                                                          • Figure 56: Attitudes towards online management of savings, researching and moving savings to obtain best rates, by type of cash savings product owned, February 2011
                                                                                                                                                                                        • Nationwide and Santander are the choice of the financially savvy
                                                                                                                                                                                          • Figure 57: Attitudes towards savings, by companies with which savings accounts are held, February 2011
                                                                                                                                                                                        • Consumers are adding to their emergency funds in 2011
                                                                                                                                                                                          • Figure 58: Motivations for planning to increase savings over the next year, February 2011
                                                                                                                                                                                      • Motivations for Saving and Investing

                                                                                                                                                                                        • Key points
                                                                                                                                                                                          • Household bills and emergencies top savings priorities
                                                                                                                                                                                            • Figure 59: Motivations for saving, February 2011
                                                                                                                                                                                          • Young adults save for major events and house deposits
                                                                                                                                                                                            • Wealthy consumers have adequate pensions and save for emotional security
                                                                                                                                                                                              • Education costs set to be prioritised amongst middle and higher income families
                                                                                                                                                                                                • Low earners saving to pay regular bills
                                                                                                                                                                                                  • Taking the long-term view
                                                                                                                                                                                                    • Figure 60: Motivations for saving, by product ownership, February 2011
                                                                                                                                                                                                  • Consumers with locked away assets have multiple savings priorities
                                                                                                                                                                                                    • Figure 61: Motivations for saving, by cash-based savings ownership, February 2011
                                                                                                                                                                                                  • Big ticket purchasers likely to be the most driven savers in 2011
                                                                                                                                                                                                    • Figure 62: Motivations for saving, by attitudes towards saving, February 2011
                                                                                                                                                                                                • Target Groups

                                                                                                                                                                                                  • Key points
                                                                                                                                                                                                    • Motivated, or apathetic?
                                                                                                                                                                                                      • Figure 63: Savings product target groups, February 2011
                                                                                                                                                                                                    • Household expenses dominated
                                                                                                                                                                                                      • Savings profile
                                                                                                                                                                                                        • Demographics
                                                                                                                                                                                                          • Consumer behaviour insight
                                                                                                                                                                                                            • Debt/mortgage repayers
                                                                                                                                                                                                              • Savings profile
                                                                                                                                                                                                                • Demographics
                                                                                                                                                                                                                  • Consumer behaviour insight
                                                                                                                                                                                                                    • Financially comfortable savers
                                                                                                                                                                                                                      • Savings profile
                                                                                                                                                                                                                        • Demographics
                                                                                                                                                                                                                          • Consumer behaviour insight
                                                                                                                                                                                                                            • Highly motivated savers
                                                                                                                                                                                                                              • Savings profile
                                                                                                                                                                                                                                • Demographics
                                                                                                                                                                                                                                  • Consumer behaviour insight
                                                                                                                                                                                                                                  • Appendix – Product Ownership

                                                                                                                                                                                                                                      • Figure 64: Most popular financial product ownership, by demographics, February 2011
                                                                                                                                                                                                                                      • Figure 65: Next most popular financial product ownership by demographics, February 2011
                                                                                                                                                                                                                                      • Figure 66: Other financial product ownership, by demographics, February 2011
                                                                                                                                                                                                                                  • Appendix – Repertoire Analysis

                                                                                                                                                                                                                                      • Figure 67: Repertoire of financial product ownership, by demographics, February 2011
                                                                                                                                                                                                                                      • Figure 68: Repertoire of financial product ownership, by demographics, February 2011
                                                                                                                                                                                                                                  • Appendix – Attitudes Towards Saving

                                                                                                                                                                                                                                      • Figure 69: Most popular savings behaviour, by demographics, February 2011
                                                                                                                                                                                                                                      • Figure 70: Next most popular savings behaviour, by demographics, February 2011
                                                                                                                                                                                                                                  • Appendix – Motivations for Saving and Investing

                                                                                                                                                                                                                                      • Figure 71: Most popular motivations for saving, by demographics, February 2011
                                                                                                                                                                                                                                      • Figure 72: Next most popular motivations for saving, by demographics, February 2011
                                                                                                                                                                                                                                  • Appendix – Target Groups

                                                                                                                                                                                                                                      • Figure 73: Target groups, by demographics, February 2011
                                                                                                                                                                                                                                      • Figure 74: Savings behaviour, by target groups, February 2011
                                                                                                                                                                                                                                      • Figure 75: Motivations for saving, by target groups, February 2011
                                                                                                                                                                                                                                      • Figure 76: Financial product ownership, by target groups, February 2011

                                                                                                                                                                                                                                  Companies Covered

                                                                                                                                                                                                                                  • Abbey
                                                                                                                                                                                                                                  • Alliance & Leicester
                                                                                                                                                                                                                                  • Association of British Insurers
                                                                                                                                                                                                                                  • Association of Payment Clearing Services
                                                                                                                                                                                                                                  • Barclays Bank plc
                                                                                                                                                                                                                                  • Bradford & Bingley plc
                                                                                                                                                                                                                                  • Britannia Building Society
                                                                                                                                                                                                                                  • British Bankers' Association (BBA)
                                                                                                                                                                                                                                  • Building Societies Association
                                                                                                                                                                                                                                  • Cater Allen Ltd
                                                                                                                                                                                                                                  • Cheltenham & Gloucester plc
                                                                                                                                                                                                                                  • Clydesdale Bank
                                                                                                                                                                                                                                  • Council of Mortgage Lenders
                                                                                                                                                                                                                                  • Coventry Building Society
                                                                                                                                                                                                                                  • Financial Services Authority (The)
                                                                                                                                                                                                                                  • Grupo Santander Central Hispano S.A.
                                                                                                                                                                                                                                  • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                                                                                                                  • HM Revenue & Customs
                                                                                                                                                                                                                                  • HSBC Private Bank (UK) Limited
                                                                                                                                                                                                                                  • Investment Management Association
                                                                                                                                                                                                                                  • Lloyds Banking Group
                                                                                                                                                                                                                                  • Marks & Spencer
                                                                                                                                                                                                                                  • Nationwide Building Society
                                                                                                                                                                                                                                  • NatWest
                                                                                                                                                                                                                                  • Northern Rock plc
                                                                                                                                                                                                                                  • Office of Fair Trading
                                                                                                                                                                                                                                  • Royal Bank of Scotland Group plc
                                                                                                                                                                                                                                  • Scottish Friendly Assurance Society Ltd
                                                                                                                                                                                                                                  • Scottish Widows Bank plc
                                                                                                                                                                                                                                  • West Bromwich Building Society
                                                                                                                                                                                                                                  • Woolwich plc
                                                                                                                                                                                                                                  • Yorkshire Building Society

                                                                                                                                                                                                                                  Deposit and Savings Accounts - UK - April 2011

                                                                                                                                                                                                                                  £1,995.00 (Excl.Tax)