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Deposit and Savings Accounts - UK - June 2016

“The prolonged low interest rate environment has disengaged consumers in the UK deposit and savings account market. The Government’s attempts to motivate people to build a savings pot with the new Personal Savings Allowance, among other changes, are not enough to combat the lack of competition from providers.”
– Samantha Phillips, Financial Services Analyst

This report discusses the following key topics:

  • Consumers show willingness to switch provider, but lack any real incentive to shop around
  • Personal Financial Management (PFM) apps are key to making saving more relevant to everyday life
  • Millennials are the least engaged in the savings market, but most eager to increase their savings

Growth in the overall value of UK deposit and savings accounts continues to accelerate. In 2015. However, consumer engagement in the market remains low as a result of a prolonged low interest rate environment and a lack of competition from providers. Relentless rate cuts by the main banks are being countered only slightly by new challengers that are looking to grow their customer bases by offering table-topping deals.

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Table of contents

  1. Overview

    • What you need to know
    • Executive Summary

        • The market
          • Retail deposits reached a total of £1.3 trillion in 2015
            • Figure 1: Total value of retail savings deposits from UK households and % change year-on-year, 2006-15
          • Interest rates continue to fall
            • Cash products soar in value
              • Figure 2: Value of new adult ISA subscriptions, 2010/11-2014/15
            • Savings ratio is lowest since records began
              • More than half of customers arrange savings accounts online
                • Figure 3: Method used to arrange a savings account in the last three years, April 2015
              • Key players
                • Lloyds Banking Group retains top position despite fall in market share
                  • NS&I now holds 10% of the savings market share
                    • New challenger banks keep savings market afloat with competitive rates
                      • The consumer
                        • 23% of people have no savings or investments
                          • Figure 4: Value of savings, April 2016
                        • Easy/instant-access accounts most popular
                          • Nearly half of adults own multiple savings products
                            • Figure 5: Number of savings products held, April 2016
                          • One in four is unaware of the new PSA
                            • Figure 6: Consumer awareness of the new personal savings allowance, April 2016
                          • Nearly half of savers are not motivated by new PSA
                            • Figure 7: Impact of the new personal savings allowance, April 2016
                          • One in four is putting extra money into current accounts
                            • Figure 8: Alternatives to saving, April 2016
                          • Millennials are most likely to be spending rather than saving
                            • Figure 9: Alternatives to saving, by generation, April 2016
                          • Consumers show willingness to switch provider
                            • What we think
                            • Issues and Insights

                              • Consumers show willingness to switch provider, but lack any real incentive to shop around
                                • The facts
                                  • The implications
                                    • Personal Financial Management (PFM) apps are key to making saving more relevant to everyday life
                                      • The facts
                                        • The implications
                                          • Millennials are the least engaged in the savings market, but most eager to increase their savings
                                            • The facts
                                              • The implications
                                              • The Market – What You Need to Know

                                                • Retail deposits reached a total of £1.3 trillion in 2015
                                                  • Interest rates continue to fall
                                                    • Cash ISA products soar in value
                                                      • Savings ratio is lowest since records began
                                                        • More than half of customers arrange savings accounts online
                                                        • Market Size and Forecast

                                                          • Retail savings deposits climbed to £1.3 trillion in 2015
                                                            • Figure 10: Total value of retail savings deposits from UK households and % change year on year, 2006-15
                                                          • Retail savings balances expected to reach £1.6 trillion by 2021
                                                            • Figure 11: Forecast of retail savings balances, 2011-21
                                                            • Figure 12: Forecast of retail savings balances, fan chart at current prices, 2011-21
                                                          • Forecast methodology
                                                          • Channels to Market

                                                            • More than half of customers arrange savings accounts online
                                                              • Figure 13: Method used to arrange a savings account in the last three years, April 2015
                                                            • Vast majority arrange directly with bank/building society
                                                              • Figure 14: Savings account purchase agent, April 2015
                                                            • Direct and online advice sources on par
                                                              • Figure 15: Savings account first point of contact, April 2015
                                                          • Market Drivers

                                                            • Interest rates continue to fall
                                                                • Figure 16: Average monthly quoted interest rates of UK monetary financial institutions (excluding Central Bank), not seasonally adjusted, January 2012-16
                                                              • Cash ISA products soar in value
                                                                  • Figure 17: Value of new adult ISA subscriptions, 2010/11-2014/15
                                                                • Wages exceed inflation for first time since 2009
                                                                  • Figure 18: Monthly change in RPI and average weekly earnings (regular pay, excluding bonuses), January 2010-January 2016
                                                                • Consumer confidence edges upwards
                                                                  • Figure 19: Financial confidence index, January 2011-16
                                                                • Savings ratio is lowest since records began
                                                                  • Figure 20: Gross household savings and savings ratio, seasonally adjusted at current prices, 2005-15
                                                              • Regulatory and Legislative Changes

                                                                • New Personal Savings Allowance (PSA) took effect in April 2016
                                                                  • Government announces Help to Save scheme for low-income workers
                                                                    • FCA launched consultation on cash savings market in January 2015
                                                                      • Changes to NS&I Products
                                                                        • Government budgets introduce changes to ISA market
                                                                          • Figure 21: Summary of changes made to ISAs and their potential impacts on the market, May 2016
                                                                      • Key Players – What You Need to Know

                                                                        • Lloyds Banking Group retains top position despite fall in market share
                                                                          • NS&I now holds 10% of the savings market share
                                                                            • New challenger banks keep savings market afloat with competitive rates
                                                                              • Brand building continues to boost advertising expenditure
                                                                              • Market Share

                                                                                • Lloyds Banking Group retains top position despite fall in market share
                                                                                  • Figure 22: Big providers’ total retail savings balances, shown on a group basis, UK 2014-15
                                                                                • Halifax and Nationwide are market leaders
                                                                                  • Figure 23: Ranking of the largest group providers of each savings product, by proportion of customers, April 2016
                                                                                  • Figure 24: Market share of selected providers, by proportion of customers, April 2016
                                                                                • NS&I now holds 10% of the savings market share
                                                                                  • Figure 25: Retail savings balances from households and market share, by sector, 2010-15
                                                                              • Competitive Strategies

                                                                                • Account closures and rate cutting
                                                                                  • Simplification of product ranges
                                                                                    • New challenger banks keep savings market afloat with competitive rates
                                                                                      • Personalisation
                                                                                        • Gamification to help people save
                                                                                          • Making saving social
                                                                                            • Rewarding loyal customers
                                                                                              • Mobile improvements
                                                                                              • Launch Activity and Innovation

                                                                                                • Personal Financial Management (PFM) apps
                                                                                                  • Social saving apps
                                                                                                    • Neobanks offer a new banking format to savings customers
                                                                                                      • Yorkshire BS launches new Single Access Savings account
                                                                                                        • Skipton Building Society launches Special Edition Tracker
                                                                                                          • Peer-to-peer investing offers an alternative to savers
                                                                                                          • Advertising and Marketing Activity

                                                                                                            • Brand building continues to boost advertising expenditure
                                                                                                              • Figure 26: Total above-the line, online display and direct mail advertising expenditure on cash savings products, by product type 2012/13-2015/16
                                                                                                            • Key player expenditure shifts dramatically
                                                                                                              • Figure 27: Top ten advertisers of cash savings products (excluding cash ISAs and children’s saving products), 2013-16
                                                                                                            • Advertisers direct 84% of content towards TV and press
                                                                                                              • Figure 28: Total advertising expenditure on cash savings products (excluding cash ISAs and children’s savings products), by media type, 2015/16 (12 months to 31 March)
                                                                                                            • Nielsen Media Research coverage
                                                                                                            • The Consumer – What You Need to Know

                                                                                                              • 23% of people have no savings or investments
                                                                                                                • Easy- or instant-access accounts are the most popular
                                                                                                                  • Nearly half of adults own multiple savings products
                                                                                                                    • One in four is unaware of the new PSA
                                                                                                                      • One in four is putting extra money into their current account
                                                                                                                        • Millennials are most likely to be spending rather than saving
                                                                                                                        • Value of Savings and Investments

                                                                                                                          • 23% of people have no savings or investments
                                                                                                                              • Figure 29: Value of savings and investments, April 2016
                                                                                                                            • Parents of adult children living at home are most likely to have no savings
                                                                                                                              • Figure 30: Value of savings and investments, by age of children/step-children living in household, April 2016
                                                                                                                            • Single dwellers are most likely to have no savings
                                                                                                                            • Ownership of Savings Products

                                                                                                                              • Easy-access or instant access accounts are the most popular
                                                                                                                                • Figure 31: Ownership of cash savings accounts, by type, April 2016
                                                                                                                              • Baby Boomers and Swing Generation are most likely to have NS&I products
                                                                                                                                  • Figure 32: Ownership of national savings products, by generation, April 2016
                                                                                                                                • Likelihood to open notice or fixed- accounts increases in line with value of savings
                                                                                                                                • Number of Savings Products Held

                                                                                                                                  • Nearly half of adults own multiple savings products
                                                                                                                                      • Figure 33: Number of savings products held, April 2016
                                                                                                                                    • Cash ISAs and easy-access accounts continue to dominate among multiple account holders
                                                                                                                                      • Figure 34: Ownership of savings products, by number of saving product types held, April 2016
                                                                                                                                  • Awareness and Understanding of Changes to the Personal Savings Allowance

                                                                                                                                    • One in four is unaware of the new PSA
                                                                                                                                      • Figure 35: Consumer awareness of the new personal savings allowance, April 2016
                                                                                                                                    • Understanding gap exists in relation to new PSA
                                                                                                                                      • Retirees are most likely to be aware and understand meaning of change
                                                                                                                                        • Younger Millennials are least engaged with savings market
                                                                                                                                        • Impact of the New Personal Savings Allowance

                                                                                                                                          • Nearly half of savers are not motivated by new PSA
                                                                                                                                            • Figure 36: Impact of new Personal Savings Allowance, April 2016
                                                                                                                                          • One in ten is planning to save less in their cash ISA as a result of PSA
                                                                                                                                            • 18-34-year-olds are most likely to be planning to increase savings
                                                                                                                                              • Figure 37: Impact of the new personal savings allowance, by age group, April 2016
                                                                                                                                          • Alternatives to Saving

                                                                                                                                            • One in four is putting extra money into their current account
                                                                                                                                                • Figure 38: Alternatives to saving, April 2016
                                                                                                                                              • 18-34-year-olds are most likely to be investing as an alternative to saving
                                                                                                                                                • Figure 39: Alternatives to saving, by age group, April 2016
                                                                                                                                              • Millennials are most likely to be spending rather than saving
                                                                                                                                                • Figure 40: Alternatives to saving, by generation, April 2016
                                                                                                                                              • Nearly half of savers are not finding alternative uses for their disposable income
                                                                                                                                                • Figure 41: Number of alternatives to saving, by value of savings and investments, April 2016
                                                                                                                                              • People in Inner & Greater London are most likely to have 3+ alternative uses for their savings
                                                                                                                                              • Approaches to Exploring New Accounts

                                                                                                                                                • Consumers show willingness to switch provider
                                                                                                                                                  • Figure 42: Behaviours when exploring savings options, April 2016
                                                                                                                                                • Older people are less likely to move savings to a different provider
                                                                                                                                                  • Figure 43: Likelihood to move savings to another provider for a better rate, by age group, April 2016
                                                                                                                                                • Younger people are most likely to consider introductory bonuses
                                                                                                                                                  • Figure 44: Likelihood to consider introductory bonuses, by age group, April 2016
                                                                                                                                                • People with £20,000-49,000 in savings are most likely to use PFM apps
                                                                                                                                                  • Figure 45: Likelihood to use Personal Financial Management apps, by value of savings, April 2016
                                                                                                                                              • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                                  • Products covered in this report
                                                                                                                                                    • Abbreviations
                                                                                                                                                      • Consumer research methodology
                                                                                                                                                      • Appendix – Market Size and Forecast

                                                                                                                                                        • Forecast – Retail savings balances
                                                                                                                                                          • Figure 46: Best- and worst-case forecast for the value of total retail savings balances, 2016-21
                                                                                                                                                        • Forecast methodology

                                                                                                                                                        Companies Covered

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                                                                                                                                                        Deposit and Savings Accounts - UK - June 2016

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