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Deposit and Savings Accounts - UK - April 2013

“The Funding for Lending Scheme has so far been detrimental to savers. It has made banks less reliant on depositors’ money to fund borrowing, removing the incentive to offer really competitive savings rates.”

– Sarah Hitchcock, Senior Analyst – Financial Services

Some questions answered in this report include:

  • Is competition increasing the savings market?
  • What types of savings accounts are consumers favouring?
  • How frequently are they saving?
  • Do consumers trust savings providers to look after their money?

The UK retail savings market is mature, stable and dominated by a handful of players, comprising the retail brands of the major British banking groups and the largest building society. Despite the comparatively low returns on offer, particularly on instant-access accounts (the most popular kind), as well as ongoing pressure on household budgets, retail deposit balances grew by 5% in 2012. This was an improvement on both 2011 and 2010, when the annual growth rate was just under 3%.

Even so, the value of retail savings has increased at a much slower rate since 2008 than in the five years prior to the financial crisis and, with the exception of 2012, has failed to keep pace with CPI inflation. Moreover, a very low base rate and low LIBOR have fed through to mortgage and loan rates (favouring borrowers), but have also depressed savings rates (disadvantaging savers). Exacerbating the situation further, the introduction of the Funding for Lending Scheme in the summer of 2012 has recently reduced competition in the deposit and savings account market and put yet further downward pressure on the interest earned on cash.

This report examines these trends in detail and examines their implications for both providers and consumers. Drawing on a range of information sources and trade research, it provides a comprehensive overview of the size and composition of the market, as well as recent provider activity. In addition, it explores consumer saving behaviour and provides insight into the attitudes and intentions of savers, by analysing the results of Mintel’s independently commissioned online consumer survey.

There are various types of deposit and savings account available to UK consumers, which typically will be managed in-branch and/or online. The main ones are as follows:

  • easy-access (or instant-access) savings account – the most widely available and commonly held, this type of account does not impose any restrictions on making withdrawals and provides either a variable interest rate or a fixed/guaranteed interest rate for an introductory period
  • notice account – this is where the account holder must give a certain number of days’ notice before making a withdrawal so as not to lose any interest
  • fixed-term/fixed-rate savings account or bond – offers a fixed rate for a fixed term, usually between one and five years
  • regular savings account – where the account holder is required to make regular monthly payments (usually ranging from £25 to £250 or £500 a month) in return for a higher interest rate
  • offshore savings account – this is where the account is set up and run by a bank, or a bank’s subsidiary, based outside of the UK, usually in the Channel Islands, the Isle of Man or Ireland. Offshore
  • accounts can offer certain tax benefits and multi-currency options, but they are not covered by the UK’s Financial Services Compensation Scheme (FSCS).

In the UK the main providers of savings accounts are the high street retail banks and building societies, although others include direct- and online-only banks, investment and private banks, retailers and the Post Office.

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Table of contents

  1. Introduction

      • Report scope and product definitions
        • Abbreviations
        • Executive Summary

            • The market
              • The market will continue to grow, albeit steadily
                • Figure 1: Forecast of retail savings balances, at current prices – fan chart, 2007-17
              • Sub-sector performance
                • Size of the saver population
                  • Market factors
                    • Poor savings environment acts as a disincentive to save
                      • Low confidence and low returns
                        • Companies, brands and innovation
                          • Largest providers of savings accounts
                            • Figure 2: Providers’ share of total retail savings balances, shown on a group basis – UK, 2012
                          • Brands score poorly on trust and differentiation
                            • Figure 3: Attitudes towards and usage of selected brands in the deposit and savings account market, December 2012
                          • Online account management has become the preferred channel
                            • Figure 4: Channel most used to access savings account, by type of account held, January 2013
                          • Savings providers cut back adspend in 2012
                            • The consumer
                              • Two fifths of savers hold more than one savings account
                                • An easy-access account is the most popular cash savings product
                                  • Figure 5: Ownership of cash savings products, by type of account, January 2013
                                • A quarter of adults save every month without fail
                                  • Figure 6: Saving frequency, January 2013
                                • Savings intentions over the coming six months
                                  • Figure 7: Amount expected to save within the next six months relative to the previous six months, January 2013
                                • More than a quarter of savers are considering alternative places to invest their cash
                                  • Figure 8: Agreement with statements about saving and savings accounts, January 2013
                                • What we think
                                • Issues in the Market

                                    • Is competition increasing the savings market?
                                      • What types of savings accounts are consumers favouring?
                                        • How frequently are they saving?
                                          • Do consumers trust savings providers to look after their money?
                                          • Trend Application

                                            • Trend: FSTR HYPR
                                              • Trend: Prove It
                                                • Mintel’s futures: Access Anything, Anywhere
                                                • Market Drivers

                                                  • Key points
                                                    • Savers are being penalised by a low base rate and high inflation
                                                      • Figure 9: Average annual changes in the Bank of England base rate, CPI and RPI – UK, 2004-13
                                                    • Negative rates mooted but very unlikely
                                                      • Online accounts offer better rates of return than their branch-based equivalents
                                                        • Figure 10: Average monthly quoted branch-based deposit interest rates, January 2006-January 2013
                                                      • Introduction of FLS has further depressed savings rates…
                                                        • …and reduced product availability
                                                          • Economic downturn prompted rise in the savings ratio…
                                                            • Figure 11: Gross household savings and saving ratio, seasonally adjusted and at current prices, 2001-12
                                                          • …though this doesn’t necessarily mean people are saving more
                                                            • Wider economic backdrop
                                                              • Household income squeeze will remain a key feature of 2013
                                                                • Figure 12: Monthly change in RPI and average weekly earnings, January 2008-December 2012
                                                              • Ongoing eurozone debt crisis threatens to further undermine confidence
                                                                • Consumer sentiment languishes in negative territory
                                                                  • Figure 13: GfK Consumer Confidence Barometer – UK, January 1989-January 2013
                                                                • Both saving and spending confidence remain weak
                                                                  • Figure 14: Saving and spending confidence, March 2001-September 2012
                                                                • Two fifths of people have ‘added to their savings’ in the past three months…
                                                                  • Figure 15: Usage of disposable income – recent past and near future, January 2013
                                                                • …but savings intentions have receded over the past few months
                                                                  • Figure 16: Cash deposit intentions, March 2006-December 2012
                                                                • More people are motivated to save by short-term materialistic goals than a desire to ensure a comfortable retirement
                                                                  • Figure 17: Main reasons for saving, February 2012
                                                              • Competitive Context

                                                                • Key points
                                                                  • Cash ISAs: both a rival and a variant product
                                                                    • Figure 18: Value of new ISA subscriptions, 2006/07-2011/12
                                                                  • Far fewer people hold equities than cash savings
                                                                    • Figure 19: Ownership of savings and investments, by asset type, November 2012
                                                                  • Improved stockmarket performance could attract disillusioned savers
                                                                    • Figure 20: FTSE 100 and FTSE All-Share – daily index movements, January 2004-February 2013
                                                                • Market SWOT Analysis

                                                                    • Figure 21: Retail savings accounts – SWOT analysis, 2013
                                                                • Who’s Innovating?

                                                                  • Key points
                                                                    • Improved funding situation reduces incentive to innovate
                                                                      • The banks are putting greater focus on their current accounts…
                                                                        • Santander’s 123 Current Account
                                                                          • M&S Bank launches Premier Current Account
                                                                            • Lloyds TSB’s Vantage offer
                                                                              • Nationwide enters the packaged account market
                                                                                • …and existing customers
                                                                                • Market Size and Forecast

                                                                                  • Key points
                                                                                    • Retail deposits increase by 5% in 2012
                                                                                      • Figure 22: Retail savings balances, by sector, 2003-12
                                                                                    • More money flowing into time accounts, as savers seek to bolster their returns
                                                                                      • Figure 23: Volume and value of individual interest-bearing current and deposit accounts (MBBGs only), 2003-11
                                                                                    • A sizeable customer base
                                                                                      • Figure 24: Estimated number of retail savers in the UK, by type of account, January 2013
                                                                                    • Very steady growth trend is forecast to continue
                                                                                      • Figure 25: Forecast of retail savings balances, at current prices – fan chart, 2007-17
                                                                                      • Figure 26: Forecast of total retail savings balances, 2012-17
                                                                                    • Forecast methodology
                                                                                      • Fan chart explanation
                                                                                      • Market Share

                                                                                        • Key points
                                                                                          • Halifax is the leading brand in the retail savings account market
                                                                                            • Figure 27: Ranking of largest providers of savings accounts, by proportion of customers, January 2013
                                                                                          • Provider rankings based on overall retail savings balances
                                                                                            • Figure 28: Providers’ total retail savings balances, shown on a group basis – UK, 2010-12
                                                                                        • Companies and Products

                                                                                            • Lloyds Banking Group
                                                                                                • Figure 29: Key annual financial data for Lloyds Banking Group, 2011 and 2012
                                                                                              • Nationwide Building Society
                                                                                                  • Figure 30: Key interim financial data for Nationwide Building Society, H1 2011 and H1 2012
                                                                                                • Santander
                                                                                                    • Figure 31: Key annual financial data for Santander UK, 2011 and 2012
                                                                                                  • Barclays
                                                                                                      • Figure 32: Key annual financial data for Barclays Plc, 2011 and 2012
                                                                                                    • HSBC
                                                                                                        • Figure 33: Key annual financial data for HSBC Bank Plc, 2011 and 2012
                                                                                                      • RBS Group
                                                                                                          • Figure 34: Key annual financial data for RBS Group, 2011 and 2012
                                                                                                      • Brand Research

                                                                                                        • Brand map
                                                                                                            • Figure 35: Attitudes towards and usage of selected brands in the deposit and savings account market, December 2012
                                                                                                          • Correspondence analysis
                                                                                                            • Brand qualities
                                                                                                              • Figure 36: Brand attributes and qualities, by selected brands operating in the deposit and savings market, December 2012
                                                                                                            • Brand personality
                                                                                                              • Figure 37: Deposit and savings account brand personality – macro image, December 2012
                                                                                                              • Figure 38: Deposit and savings account brand personality – micro image, December 2012
                                                                                                            • Brand experience
                                                                                                              • Figure 39: Usage of brands operating in the deposit and savings market, December 2012
                                                                                                              • Figure 40: Satisfaction with various brands operating in the deposit and savings market, December 2012
                                                                                                              • Figure 41: Consideration of brands that operate in the deposit and savings market, December 2012
                                                                                                              • Figure 42: Consumer perceptions of current brand performance of selected brands operating in the deposit and savings market, December 2012
                                                                                                              • Figure 43: Deposit and savings account brand recommendation – Net Promoter Score, December 2012
                                                                                                            • Brand index
                                                                                                              • Figure 44: Deposit and savings account brand index, December 2012
                                                                                                              • Figure 45: Deposit and savings account brand index vs. recommendation, December 2012
                                                                                                            • Target group analysis
                                                                                                              • Figure 46: Target groups, December 2012
                                                                                                              • Figure 47: Usage of brands operating in the deposit and savings market, by target groups, December 2012
                                                                                                            • Group One – Conformists
                                                                                                              • Group Two – Simply the Best
                                                                                                                • Group Three – Shelf Stalkers
                                                                                                                  • Group Four – Habitual Shoppers
                                                                                                                    • Group Five – Individualists
                                                                                                                    • Brand Communication and Promotion

                                                                                                                      • Key points
                                                                                                                        • 2012 sees sharp fall in industry adspend
                                                                                                                          • Figure 48: Total advertising expenditure on cash savings products, 2008-12
                                                                                                                        • In 2012 savings providers spent more on their brands
                                                                                                                          • Figure 49: Total advertising expenditure on cash savings products, by product type, 2008-12
                                                                                                                        • TV claimed the largest share of sector adspend in 2012
                                                                                                                          • Figure 50: Distribution of adspend on cash savings products, by media type, 2010-12
                                                                                                                        • Halifax was once again the highest-spending advertiser in the savings account market in 2012…
                                                                                                                          • Figure 51: Top ten advertisers of savings accounts (excluding cash ISAs), 2010-12
                                                                                                                        • …while sister brand Lloyds TSB invested the most in the cash ISA market
                                                                                                                          • Figure 52: Top ten advertisers of cash ISAs, 2010-12
                                                                                                                      • Channels to Market

                                                                                                                        • Key points
                                                                                                                          • Greater focus on remote channels underpins steady decline in the UK branch network
                                                                                                                            • Figure 53: UK bank and building society branch networks, 2003-11
                                                                                                                          • Most savers access their accounts online
                                                                                                                            • Figure 54: Channel most used to access savings account, by type of account held, January 2013
                                                                                                                        • Number of Accounts Held and Switching Activity

                                                                                                                          • Key points
                                                                                                                            • Many people hold multiple savings accounts
                                                                                                                              • Figure 55: Number of savings accounts held, 2009-12
                                                                                                                            • Fairly stable customer churn
                                                                                                                              • Figure 56: Percentage of savers who have opened a new savings account within the past 12 months, 2009-12
                                                                                                                          • Types of Savings Account Held

                                                                                                                            • Key points
                                                                                                                              • Survey background
                                                                                                                                • Roughly four in five UK adults have some form of cash savings product
                                                                                                                                  • Figure 57: Ownership of cash savings products, February 2012 and January 2013
                                                                                                                                • Over-55s are most likely to have savings…
                                                                                                                                  • Figure 58: Ownership of cash savings products, by gender and age, January 2013
                                                                                                                                • …due to their greater wealth accumulation
                                                                                                                                  • Figure 59: Value of investible assets, by gender and age, January 2013
                                                                                                                                • Fixed-term bonds and tax-exempt savings products strongly appeal to those with substantial assets
                                                                                                                                  • Figure 60: Ownership of cash savings products, by value of investible assets, January 2013
                                                                                                                              • Recent Saving Activity and Future Plans

                                                                                                                                • Key points
                                                                                                                                  • One in four adults are managing to save every month without fail
                                                                                                                                    • Figure 61: Saving frequency, by type of savings product owned, January 2013
                                                                                                                                  • Customers who are planning to save more over the next six months are offset by those who expect to save less
                                                                                                                                    • Figure 62: Saving intentions over the next six months, by type of savings product owned, January 2013
                                                                                                                                • Customer Experience

                                                                                                                                  • Key points
                                                                                                                                    • One in four have been treated poorly or unfairly by their savings account provider
                                                                                                                                      • Figure 63: Frequency of experiencing poor customer service within the past two years, January 2013
                                                                                                                                    • Customer detriment is most common among notice account holders
                                                                                                                                      • Figure 64: Frequency of experiencing poor customer service within the past two years, by type of savings account owned, January 2013
                                                                                                                                    • Nationwide has the best customer service record
                                                                                                                                      • Figure 65: Frequency of experiencing poor customer service within the past two years, by savings account provider (top seven only), January 2013
                                                                                                                                  • Attitudes Towards Saving and Savings Accounts

                                                                                                                                    • Key points
                                                                                                                                      • Most savers are disappointed by the rates of returns they are getting
                                                                                                                                        • Figure 66: Agreement with statements about saving and savings accounts, January 2013
                                                                                                                                      • Fixed-term bond holders are the most disillusioned
                                                                                                                                        • Figure 67: Agreement with statements about saving and savings accounts, by type of account held, January 2013
                                                                                                                                      • A large minority of savers think it’s unsafe to keep savings at one bank
                                                                                                                                        • Figure 68: Level of agreement with statements about saving and savings accounts, by value of investible assets, January 2013
                                                                                                                                    • Appendix – Market Size and Forecast

                                                                                                                                      • Total market forecast – best- and worst-case scenarios
                                                                                                                                        • Figure 69: Forecast of total retail savings balances – best- and worst-case scenarios, at current prices, 2012-17
                                                                                                                                      • Market forecast by sector
                                                                                                                                        • Figure 70: Forecast of total retail savings balances, by sector, at current prices, 2007-17
                                                                                                                                      • Bank sector forecast
                                                                                                                                        • Figure 71: Forecast of retail savings balances – bank sector only, at current prices – fan chart, 2007-17
                                                                                                                                        • Figure 72: Forecast of total retail savings balances – bank sector only, 2012-17
                                                                                                                                        • Figure 73: Forecast of bank sector retail savings balances – best- and worst-case scenarios, at current prices, 2012-17
                                                                                                                                      • Mutual sector forecast
                                                                                                                                        • Figure 74: Forecast of retail savings balances – mutual sector only, at current prices – fan chart, 2007-17
                                                                                                                                        • Figure 75: Forecast of total retail savings balances – mutual sector only, 2012-17
                                                                                                                                        • Figure 76: Forecast of mutual retail savings balances – best- and worst-case scenarios, at current prices, 2012-17
                                                                                                                                      • NS&I sector forecast
                                                                                                                                        • Figure 77: Forecast of retail savings balances – NS&I sector only, at current prices – fan chart, 2007-17
                                                                                                                                        • Figure 78: Forecast of total retail savings balances – NS&I sector only, 2012-17
                                                                                                                                        • Figure 79: Forecast of NS&I retail savings balances – best- and worst-case scenarios, at current prices, 2012-17
                                                                                                                                      • Forecast methodology
                                                                                                                                        • Fan chart explanation
                                                                                                                                        • Appendix – Brand Research

                                                                                                                                            • Figure 80: Brand usage, December 2012
                                                                                                                                            • Figure 81: Brand commitment, December 2012
                                                                                                                                            • Figure 82: Brand momentum, December 2012
                                                                                                                                            • Figure 83: Brand diversity, December 2012
                                                                                                                                            • Figure 84: Brand satisfaction, December 2012
                                                                                                                                            • Figure 85: Brand recommendation, December 2012
                                                                                                                                            • Figure 86: Brand attitude, December 2012
                                                                                                                                            • Figure 87: Brand image – macro image, December 2012
                                                                                                                                            • Figure 88: Brand image – micro image, December 2012
                                                                                                                                            • Figure 89: Profile of target groups, by demographics, December 2012
                                                                                                                                            • Figure 90: Psychographic segmentation, by target groups, December 2012
                                                                                                                                            • Figure 91: Brand usage, by target groups, December 2012
                                                                                                                                          • Brand index
                                                                                                                                            • Figure 92: Brand index, December 2012
                                                                                                                                        • Appendix – Ownership of Savings Accounts

                                                                                                                                            • Figure 93: Ownership of cash savings products, by demographics, January 2013
                                                                                                                                        • Appendix – Value of Investible Assets

                                                                                                                                            • Figure 94: Value of investible assets, by demographics, January 2013
                                                                                                                                        • Appendix – Customer Profiles for the Top Seven Providers

                                                                                                                                            • Figure 95: Comparison of customer profiles for the top seven providers of savings accounts, by demographics, January 2013
                                                                                                                                        • Appendix – Recent Savings Activity and Future Plans

                                                                                                                                            • Figure 96: Saving frequency, by demographics, January 2013
                                                                                                                                            • Figure 97: Saving frequency, by value of investible assets, January 2013
                                                                                                                                            • Figure 98: Saving intentions over next six months, by demographics, January 2013
                                                                                                                                            • Figure 99: Saving intentions over the next six months, by value of investible assets, January 2013
                                                                                                                                            • Figure 100: Saving intentions over next six months, by provider of easy-access savings account (top seven only), January 2013
                                                                                                                                        • Appendix – Customer Experience

                                                                                                                                            • Figure 101: Experience of poor customer service within past two years in relation to savings accounts, by demographics, January 2013
                                                                                                                                        • Appendix – Attitudes Towards Saving and Savings Accounts

                                                                                                                                            • Figure 102: Agreement with statements about saving and savings accounts, by demographics, January 2013
                                                                                                                                            • Figure 103: Agreement with further statements about saving and savings accounts, by demographics, January 2013
                                                                                                                                            • Figure 104: Level of agreement with statements about saving and savings accounts, by account provider (top seven only), January 2013

                                                                                                                                        Companies Covered

                                                                                                                                        • Abbey
                                                                                                                                        • Alliance & Leicester
                                                                                                                                        • Bank of England
                                                                                                                                        • Barclaycard
                                                                                                                                        • Barclays Bank plc
                                                                                                                                        • Bradford & Bingley plc
                                                                                                                                        • Cater Allen Ltd
                                                                                                                                        • Cheltenham & Gloucester plc
                                                                                                                                        • Cheshire Building Society
                                                                                                                                        • Co-operative Group
                                                                                                                                        • Derbyshire Building Society
                                                                                                                                        • Direct Line Group Limited
                                                                                                                                        • Dunfermline Building Society
                                                                                                                                        • Ferrari S.p.A.
                                                                                                                                        • Financial Services Authority (The)
                                                                                                                                        • First Direct
                                                                                                                                        • Football Association (The)
                                                                                                                                        • Grupo Santander Central Hispano S.A.
                                                                                                                                        • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                        • HSBC Holdings plc
                                                                                                                                        • HSBC Private Bank (UK) Limited
                                                                                                                                        • ING Direct
                                                                                                                                        • Lloyds Banking Group
                                                                                                                                        • Lloyds TSB Insurance
                                                                                                                                        • Marks & Spencer
                                                                                                                                        • Nationwide Building Society
                                                                                                                                        • NatWest
                                                                                                                                        • Portman Building Society
                                                                                                                                        • Royal Bank of Scotland Group plc

                                                                                                                                        Deposit and Savings Accounts - UK - April 2013

                                                                                                                                        US $2,478.79 (Excl.Tax)