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Deposit and Savings Accounts - UK - April 2014

“The prolonged period of low rates of return on savings products has been detrimental to savers. Consumers are now showing a tendency to grow their in-credit current account balances, which often offer more attractive rates and benefits, instead of moving money to their savings accounts.”

– Chryso Kolakkides, Senior Financial Services Analyst

Some questions answered in this report include:

  • Are consumers still driven entirely by interest rates?
  • Can competitive current accounts challenge easy-access savings accounts?
  • Are there opportunities to reward customer loyalty?

The UK retail savings market has had a challenging time since 2008, with prevailing low interest rates and ongoing pressure on household budgets. In 2013, retail deposits grew, remaining well below the growth rates seen in the years preceding the financial crisis.

Dominated by a handful of players comprising the retail brands of the major British banking groups and the largest building society, the savings market has seen limited product innovation over the last few years. The introduction of the Funding for Lending Scheme (FLS) in July 2012 and the Current Account Switch Service (CASS) in August 2013 have shifted providers’ focus away from their savings product range and towards their current account offerings. In an effort to attract new customers, banks and building societies are competing on new product launches with higher interest rates on in-credit balances, making current accounts an undeniable rival product to deposit and savings accounts.

This report examines these trends and their implications for both providers and consumers. Drawing on a range of information sources, it provides a comprehensive overview of how the market is evolving, as well as recent provider activity and identifies where opportunities for growth may exist. It also explores consumer saving behaviour, providing insight into savers’ attitudes and intentions by analysing the results of Mintel’s independently commissioned online consumer survey.

The focus of this report is on retail deposit and savings accounts for the adult market. Although reference is made to children’s savings accounts and tax-exempt cash ISAs, these products are not covered extensively here, but form the focus of two separate Mintel reports: ISAs and Saving and Investing for Children.

There are various types of deposit and savings account available to UK consumers, which typically can 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

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.

Another major player in the retail savings environment is National Savings & Investments (NS&I). Its current product range encompasses a Direct Saver account (easy-access account, with a variable interest rate, only accessible by phone or online); an Income Bond (easy-access bond for those with at least £500 to invest, generating monthly income based on a variable interest rate); a Direct ISA (minimum deposit of £1 and variable interest rate); an Investment Account (a postal account with a minimum deposit requirement of £20); a Children’s Savings Bond and Premium Bonds (tax-exempt product that requires a minimum deposit of £100, which goes into a monthly prize draw and offers the chance of winning up to £1 million).

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Table of contents

  1. Introduction

      • Report scope and product definitions
        • Abbreviations
        • Executive Summary

            • The market
              • Steady growth trend is forecast to continue
                • Figure 1: Forecast of retail savings balances, fan chart at current prices, 2008-18
              • Retail deposits increased by nearly 4% in 2013
                • Figure 2: Total value of retail savings balances from households, 2008-13
              • Cash ISA subscriptions back on the rise
                • Market factors
                  • Rates of return continue to act as a disincentive to save….
                    • …but gap between inflation and wage growth is narrowing
                      • Companies, brands and innovation
                        • Largest providers of savings accounts
                          • Figure 3: Providers’ market share based on total retail savings balances, shown on a group basis, UK, 2013
                        • Online banking channels are the preferred channel
                          • Figure 4: Activities relating to savings, by channel preference, January 2014
                        • Sharp decline in industry adspend continues in 2013
                          • Figure 5: Total advertising expenditure on cash savings products, 2009-13
                        • The consumer
                          • Over two fifths with savings have less than £20,000
                            • Figure 6: Value of savings and investments, January 2014
                          • Easy-access accounts among the most popular savings products
                            • Figure 7: Ownership of savings accounts, January 2014
                          • Just over a quarter of non-savers expect to start saving
                            • Figure 8: Future savings expectations, January 2014
                          • Less positive outlook for non-savers
                            • Figure 9: Future savings expectations, January 2014
                          • Interest rate is a priority when choosing savings products
                            • Figure 10: Influential factors for savings product uptake, January 2014
                          • Nearly two thirds of savings account holders tend to keep extra money in their current account
                            • Figure 11: Saving habits using current accounts, January 2014
                            • Figure 12: Attitudes towards saving in a current account, January 2014
                          • What we think
                          • Issues and Insights

                              • Consumers are not driven entirely by interest rates anymore
                                • The facts
                                  • The implications
                                    • Competitive current accounts challenge easy-access savings accounts
                                      • The facts
                                        • The implications
                                          • Move towards scrapping ‘teaser rates’ and rewarding customer loyalty
                                            • The facts
                                              • The implications
                                              • Trend Application

                                                • Savings providers can ‘nudge’ consumers into saving
                                                  • Helping people feel protected
                                                    • The next generation of savers
                                                    • Regulation in the Savings Market

                                                      • Key points
                                                        • Budget 2014 reveals support for savers
                                                          • Introduction of CASS has turned all eyes on current accounts
                                                            • FCA to investigate savings market
                                                              • Funding for Lending Scheme has harmed savers
                                                              • Market Drivers

                                                                • Key points
                                                                  • Low base rate and high inflation continue
                                                                    • Figure 13: Average annual changes in the RPI, CPI and Bank of England base rate, UK, 2005-13
                                                                  • Rates of return continue to suffer
                                                                    • Figure 14: Average monthly quoted branch-based deposit interest rates, January 2007-February 2014
                                                                  • Savings ratio slips in 2013
                                                                    • Figure 15: Gross household savings and savings ratio, seasonally adjusted and at current prices, UK, 2002-13
                                                                  • Gap between inflation and wage growth is narrowing
                                                                    • Figure 16: Monthly change in RPI and average weekly earnings, January 2009-January 2014
                                                                  • Consumer sentiment on an upward trend…
                                                                    • Figure 17: GfK Consumer confidence barometer – UK, January 1994-February 2014
                                                                    • Figure 18: Spending and saving confidence, March 2001-December 2013*
                                                                  • …but many continue to feel under financial pressure
                                                                  • Competitor Products

                                                                    • Key points
                                                                      • Cash ISA subscriptions back on the rise
                                                                        • Figure 19: Value of new ISA subscriptions, 2007/08-2012/13
                                                                      • Product innovation in the current account market renders struggle for saving accounts
                                                                        • Equity-based investments remain far behind in popularity
                                                                          • Figure 20: Ownership of savings and investments, by asset type, November 2013
                                                                          • Figure 21: Ownership of savings and investments, November 2013
                                                                      • Who’s Innovating?

                                                                        • Key points
                                                                          • Current account landscape reduces incentive to innovate
                                                                            • New savings accounts emerge from challenger banks
                                                                              • FirstSave launches three competitive fixed-rate online savings accounts
                                                                                • Aldermore lets business customers customise their terms
                                                                                  • Providers look to simplify their savings product range
                                                                                    • Technology assists with promoting savings
                                                                                    • Market Size and Forecast

                                                                                      • Key points
                                                                                        • Retail deposits increased by nearly 4% in 2013
                                                                                          • Figure 22: Retail savings balances from households, by sector, 2004-13
                                                                                        • Money flowing into sight accounts as savers look towards packaged current accounts
                                                                                          • Figure 23: Volume and value of individual interest-bearing current and deposit accounts (MBBGs only), 2004-12
                                                                                        • Five-year forecast of the value of retail deposits
                                                                                          • Figure 24: Forecast of retail savings balances, fan chart at current prices, 2008-18
                                                                                          • Figure 25: Forecast of total retail savings balances, 2008-18
                                                                                        • Forecast methodology
                                                                                          • Fan chart explanation
                                                                                          • Market Share

                                                                                            • Key points
                                                                                              • Lloyds Banking Group holds the top position based on overall retail savings balances
                                                                                                • Figure 26: Providers’ total retail savings balances, shown on a group basis – UK, 2012-13
                                                                                              • Halifax, Barclays and Nationwide are the market leaders in the retail savings account market
                                                                                                • Figure 27: Ranking of the largest providers of savings accounts, by proportion of customers, January 2014
                                                                                            • Companies and Products

                                                                                                • Lloyds Banking Group
                                                                                                  • Company description
                                                                                                    • Ranking in the retail savings market
                                                                                                      • Savings product range
                                                                                                        • Distribution mix
                                                                                                          • Recent financial performance
                                                                                                            • Figure 28: Key annual financial data for Lloyds Banking Group, 2012 and 2013
                                                                                                          • Brand positioning and strategy
                                                                                                            • Recent activity
                                                                                                              • Barclays
                                                                                                                • Company description
                                                                                                                  • Ranking in the retail savings market
                                                                                                                    • Savings product range
                                                                                                                      • Distribution mix
                                                                                                                        • Recent financial performance
                                                                                                                          • Figure 29: Key annual financial data for Barclays Plc, 2012 and 2013
                                                                                                                        • Brand positioning and strategy
                                                                                                                          • Recent activity
                                                                                                                            • Nationwide
                                                                                                                              • Company description
                                                                                                                                • Ranking in the retail savings market
                                                                                                                                  • Savings product range
                                                                                                                                    • Distribution mix
                                                                                                                                      • Recent financial performance
                                                                                                                                        • Figure 30: Key interim financial data for Nationwide Building society, H1 2012 and H1 2013
                                                                                                                                      • Brand positioning and strategy
                                                                                                                                        • Recent activity
                                                                                                                                          • HSBC
                                                                                                                                            • Company description
                                                                                                                                              • Ranking in the retail savings market
                                                                                                                                                • Savings product range
                                                                                                                                                  • Distribution mix
                                                                                                                                                    • Recent financial performance
                                                                                                                                                      • Figure 31: Key annual financial data for HSBC Bank Plc, 2012 and 2013
                                                                                                                                                    • Brand positioning and strategy
                                                                                                                                                      • Recent activity
                                                                                                                                                        • Santander
                                                                                                                                                          • Company description
                                                                                                                                                            • Ranking in the retail savings market
                                                                                                                                                              • Savings product range
                                                                                                                                                                • Distribution mix
                                                                                                                                                                  • Recent financial performance
                                                                                                                                                                    • Figure 32: Key annual financial data for Santander UK, 2012 and 2013
                                                                                                                                                                  • Brand positioning and strategy
                                                                                                                                                                    • Recent activity
                                                                                                                                                                      • RBS Group
                                                                                                                                                                        • Company description
                                                                                                                                                                          • Ranking in the retail savings market
                                                                                                                                                                            • Savings product range
                                                                                                                                                                              • Distribution mix
                                                                                                                                                                                • Recent financial performance
                                                                                                                                                                                  • Figure 33: Key annual financial data for RBS Group, 2012-13
                                                                                                                                                                                • Brand positioning and strategy
                                                                                                                                                                                  • Recent activity
                                                                                                                                                                                  • Brand Communication and Promotion

                                                                                                                                                                                    • Key points
                                                                                                                                                                                      • Sharp decline in industry adspend continues in 2013
                                                                                                                                                                                        • Figure 34: Total advertising expenditure on cash savings products, 2009-13
                                                                                                                                                                                      • Instant-access accounts suffer greatest decline in adspend
                                                                                                                                                                                        • Figure 35: Total advertising expenditure on cash savings products, by product type, 2009-13
                                                                                                                                                                                      • Halifax holds top position as highest spending advertiser in the savings account market
                                                                                                                                                                                        • Figure 36: Top ten advertisers of savings accounts (excluding cash ISAs), 2011-13
                                                                                                                                                                                      • Barclays top advertiser of cash ISAs
                                                                                                                                                                                        • Figure 37: Top ten advertisers of cash ISAs, 2011-13
                                                                                                                                                                                      • A note on adspend
                                                                                                                                                                                      • Channels to Market

                                                                                                                                                                                        • Key points
                                                                                                                                                                                          • Online banking channels are preferred…
                                                                                                                                                                                            • Figure 38: Activities relating to savings, by channel preference, January 2014
                                                                                                                                                                                          • …even among older age groups
                                                                                                                                                                                            • Figure 39: Activities relating to savings by channel preference, by age, January 2014
                                                                                                                                                                                          • Mobile banking should pick up even more in the coming years
                                                                                                                                                                                            • Many consumers still use branches
                                                                                                                                                                                              • Decline in the UK branch network is speeding up
                                                                                                                                                                                                • Figure 40: UK bank and building society branch networks, 2003-12
                                                                                                                                                                                              • Balancing ‘bricks and clicks’ may be the best way forward
                                                                                                                                                                                              • Value of Savings and Investments

                                                                                                                                                                                                • Key points
                                                                                                                                                                                                  • Survey background
                                                                                                                                                                                                    • Over two fifths with savings below £20,000
                                                                                                                                                                                                      • Figure 41: Value of savings and investments, January 2013 and January 2014
                                                                                                                                                                                                    • Higher earners most likely to have savings worth more than £50,000
                                                                                                                                                                                                      • Figure 42: Value of savings and investments, by gross annual household income, January 2014
                                                                                                                                                                                                    • Older adults more likely to have a higher level of savings
                                                                                                                                                                                                      • Figure 43: Value of savings and investments, by gender and age, January 2014
                                                                                                                                                                                                    • Young savers create opportunities in the savings market
                                                                                                                                                                                                      • Gender gap in the value of savings
                                                                                                                                                                                                        • Figure 44: Value of savings and investments, by gender and age, January 2014
                                                                                                                                                                                                    • Ownership of Savings Products

                                                                                                                                                                                                      • Key points
                                                                                                                                                                                                        • Easy-access accounts among the most popular savings products
                                                                                                                                                                                                          • Figure 45: Ownership of savings accounts, January 2014
                                                                                                                                                                                                        • Regular savings accounts tend to appeal to the younger adult savers…
                                                                                                                                                                                                          • Figure 46: Ownership of savings accounts, by age, January 2014
                                                                                                                                                                                                        • …while fixed-term and tax-exempt savings products appeal to those with high value of savings
                                                                                                                                                                                                          • Figure 47: Ownership of savings accounts, by value of savings and investments, January 2014
                                                                                                                                                                                                        • Over half of adult savers have multiple savings products
                                                                                                                                                                                                          • Figure 48: Number of savings product types held, January 2014
                                                                                                                                                                                                          • Figure 49: Ownership of savings products, by number of savings product types held, January 2014
                                                                                                                                                                                                        • Higher-income households more likely to own more product types
                                                                                                                                                                                                          • Figure 50: Number of savings product types held, by gross annual household incomes, January 2014
                                                                                                                                                                                                      • Future Savings Expectations

                                                                                                                                                                                                        • Key points
                                                                                                                                                                                                          • Just over a quarter of non-savers expect to start saving
                                                                                                                                                                                                            • Figure 51: Future savings expectations, January 2014
                                                                                                                                                                                                            • Figure 52: Future savings expectations, January 2014
                                                                                                                                                                                                          • Young savers are confident about the next six months
                                                                                                                                                                                                            • Figure 53: Future savings expectations, by age, January 2014
                                                                                                                                                                                                          • Regular savings account holders most likely to increase their savings
                                                                                                                                                                                                            • Figure 54: Future savings expectations, by ownership of savings accounts, January 2014
                                                                                                                                                                                                        • Influential Factors for Savings Product Uptake

                                                                                                                                                                                                          • Key points
                                                                                                                                                                                                            • Interest rate is a priority when choosing savings products
                                                                                                                                                                                                              • Figure 55: Influential factors for savings product uptake, January 2014
                                                                                                                                                                                                              • Figure 56: Influential factors for savings product uptake, January 2014
                                                                                                                                                                                                            • Consumers also on the look-out for loyalty rewards
                                                                                                                                                                                                              • Online access more important than branch access
                                                                                                                                                                                                                • FSCS protection is a main concern for those with higher value savings
                                                                                                                                                                                                                  • Figure 57: Influential factors for savings product uptake, by value of savings and investments, January 2014
                                                                                                                                                                                                              • Saving Habits Using Current Accounts

                                                                                                                                                                                                                • Key points
                                                                                                                                                                                                                  • Nearly two thirds of savings account holders tend to keep extra money in their current account
                                                                                                                                                                                                                    • Figure 58: Saving habits using current accounts, January 2014
                                                                                                                                                                                                                    • Figure 59: Attitudes towards saving in a current account, January 2014
                                                                                                                                                                                                                  • Consumer inertia may also be a factor
                                                                                                                                                                                                                    • Competitive interest rates on current accounts stand in the way of saving accounts
                                                                                                                                                                                                                    • Appendix – Market Drivers

                                                                                                                                                                                                                        • Figure 60: Real households’ disposable income, 2002-13
                                                                                                                                                                                                                        • Figure 61: Trends in current financial situation compared to a year ago, January 2012-14
                                                                                                                                                                                                                    • Appendix – Competitor Products

                                                                                                                                                                                                                        • Figure 62: Volume and value of ISA subscriptions, by type of ISA, 2007/08-2012/13
                                                                                                                                                                                                                    • Appendix – Market Size and Forecast

                                                                                                                                                                                                                        • Figure 63: Total market forecast, best- and worst-case scenarios
                                                                                                                                                                                                                    • Appendix – Channels to Market

                                                                                                                                                                                                                        • Figure 64: UK bank and building society branch networks, 2002-12
                                                                                                                                                                                                                      • Details on providers’ branch networks
                                                                                                                                                                                                                        • Lloyds Banking Group
                                                                                                                                                                                                                          • Santander UK
                                                                                                                                                                                                                            • Barclays
                                                                                                                                                                                                                              • RBS Group
                                                                                                                                                                                                                                • HSBC
                                                                                                                                                                                                                                  • Consumer data on preferences for retail banking channels
                                                                                                                                                                                                                                    • Figure 65: Preferences for retail banking channels, by ownership of different types of savings accounts, January 2014
                                                                                                                                                                                                                                    • Figure 66: Preferences for retail banking channels – Researching a savings product, by demographics, January 2014
                                                                                                                                                                                                                                    • Figure 67: Preferences for retail banking channels – Applying for a savings product, by demographics, January 2014
                                                                                                                                                                                                                                    • Figure 68: Preferences for retail banking channels – Checking your savings balance, by demographics, January 2014
                                                                                                                                                                                                                                    • Figure 69: Preferences for retail banking channels – Transferring money between accounts, by demographics, January 2014
                                                                                                                                                                                                                                • Appendix – Value of Savings and Investments

                                                                                                                                                                                                                                    • Figure 70: Value of savings and investments, by demographics, January 2014
                                                                                                                                                                                                                                    • Figure 71: Value of savings and investments, by demographics, January 2014 (continued)
                                                                                                                                                                                                                                • Appendix – Ownership of Savings Products

                                                                                                                                                                                                                                    • Figure 72: Ownership of savings accounts, by demographics, January 2014
                                                                                                                                                                                                                                    • Figure 73: Ownership of savings accounts, by demographics, January 2014 (continued)
                                                                                                                                                                                                                                    • Figure 74: Ownership of savings accounts, by demographics, January 2014 (continued)
                                                                                                                                                                                                                                    • Figure 75: Number of savings product types held, by demographics, January 2014
                                                                                                                                                                                                                                • Appendix – Future Savings Expectations

                                                                                                                                                                                                                                    • Figure 76: Future savings expectations of individuals with savings and/or investments, by demographics, January 2014
                                                                                                                                                                                                                                    • Figure 77: Future savings expectations of individuals with no savings or investments, by demographics, January 2014
                                                                                                                                                                                                                                • Appendix – Influential Factors for Savings Product Uptake

                                                                                                                                                                                                                                    • Figure 78: Influential factors for savings product uptake, by demographics, January 2014
                                                                                                                                                                                                                                    • Figure 79: Influential factors for savings product uptake, by demographics, January 2014 (continued)
                                                                                                                                                                                                                                    • Figure 80: Influential factors for savings product uptake – Rank 1, by demographics, January 2014
                                                                                                                                                                                                                                    • Figure 81: Influential factors for savings product uptake – Rank 1, by demographics, January 2014 (continued)
                                                                                                                                                                                                                                    • Figure 82: Influential factors for savings product uptake – Rank 2, by demographics, January 2014
                                                                                                                                                                                                                                    • Figure 83: Influential factors for savings product uptake – Rank 2, by demographics, January 2014 (continued)
                                                                                                                                                                                                                                    • Figure 84: Influential factors for savings product uptake – Rank 3, by demographics, January 2014
                                                                                                                                                                                                                                    • Figure 85: Influential factors for savings product uptake – Rank 3, by demographics, January 2014 (continued)
                                                                                                                                                                                                                                • Appendix – Saving Habits Using Current Accounts

                                                                                                                                                                                                                                    • Figure 86: Saving habits using current accounts, by demographics, January 2014
                                                                                                                                                                                                                                    • Figure 87: Attitudes towards saving in a current account, by demographics, January 2014
                                                                                                                                                                                                                                    • Figure 88: Attitudes towards saving in a current account, by demographics, January 2014 (continued)

                                                                                                                                                                                                                                Companies Covered

                                                                                                                                                                                                                                • Abbey
                                                                                                                                                                                                                                • Alliance & Leicester
                                                                                                                                                                                                                                • Apple Computer UK Ltd
                                                                                                                                                                                                                                • Argos
                                                                                                                                                                                                                                • Asda Group Ltd
                                                                                                                                                                                                                                • Bank of England
                                                                                                                                                                                                                                • Barclays Bank plc
                                                                                                                                                                                                                                • Bradford & Bingley plc
                                                                                                                                                                                                                                • BT Group plc
                                                                                                                                                                                                                                • Caffé Nero Group Plc
                                                                                                                                                                                                                                • Cater Allen Ltd
                                                                                                                                                                                                                                • Cheshire Building Society
                                                                                                                                                                                                                                • Cineworld
                                                                                                                                                                                                                                • Derbyshire Building Society
                                                                                                                                                                                                                                • Direct Line Group Limited
                                                                                                                                                                                                                                • Dunfermline Building Society
                                                                                                                                                                                                                                • Ferrari S.p.A.
                                                                                                                                                                                                                                • First Direct
                                                                                                                                                                                                                                • Google, Inc.
                                                                                                                                                                                                                                • Grupo Santander UK
                                                                                                                                                                                                                                • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                                                                                                                • HSBC Private Bank (UK) Limited
                                                                                                                                                                                                                                • ING Direct
                                                                                                                                                                                                                                • Lloyds Banking Group
                                                                                                                                                                                                                                • Lloyds TSB Insurance
                                                                                                                                                                                                                                • Marks & Spencer
                                                                                                                                                                                                                                • Nationwide Building Society
                                                                                                                                                                                                                                • NatWest
                                                                                                                                                                                                                                • Ocado Retail Ltd
                                                                                                                                                                                                                                • Pensions Policy Institute
                                                                                                                                                                                                                                • Portman Building Society
                                                                                                                                                                                                                                • Post Office Limited
                                                                                                                                                                                                                                • Royal Bank of Scotland Group plc
                                                                                                                                                                                                                                • Royal National Institute of the Blind (RNIB)
                                                                                                                                                                                                                                • Scottish Widows Bank plc
                                                                                                                                                                                                                                • Tesco (UK)
                                                                                                                                                                                                                                • Wm Morrison Supermarkets

                                                                                                                                                                                                                                Deposit and Savings Accounts - UK - April 2014

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