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Deposit and Savings Accounts - UK - May 2009

The deposit-based savings industry has experienced the most turbulent period in its history during the course of the past 18 months. Indeed, the credit crunch and global banking crisis has precipitated the sad demise of several high-profile and long-established savings institutions including Bradford & Bingley, Northern Rock and the Dunfermline Building Society, while a number of eminent banks have been forced to rely on billions of pounds of taxpayers’ money in order to stay afloat.

However, in spite of the current turmoil, the savings account market remains a key sector within the wider financial services industry. This partly relates to the fact that deposit-based savings accounts are among the most widely held of all the different financial products. Indeed, around 31 million adults currently hold a deposit or savings account, which clearly represents a sizeable customer base.

This report provides an assessment of recent trends within this sector. It analyses market data, considers the prospects for future growth and reports industry views on a range of issues. In addition, it provides analysis of Mintel’s independently commissioned consumer research, which identifies the proportion of adults who own a deposit account; establishes the penetration of savings accounts by brand; and considers attitudes towards a number of salient saving-related issues.

Main findings of the research

  • Mintel’s research found that more than six in ten adults currently hold a deposit-based savings product.

  • Instant-access accounts are the most popular savings products, with exactly half of the population holding such an account, while a third of the consumer base own a cash ISA.

  • Halifax is the leading player within the deposit-based savings market, with one in five savers holding an account with the former building society.

  • Furthermore, almost four in ten savers hold a deposit account with at least one of the savings brands within the combined Lloyds Banking Group.

  • A greater proportion of savers said that accessibility issues would influence their choice of savings account than said they would choose an account simply on the rate of interest.

  • One in five deposit account holders were found to appreciate the convenience of managing their savings over the internet.

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Table of contents

  1. Issues in the Market

      • Main findings of the research
        • Abbreviations
        • Future Opportunities

          • Take the worry out of savings
            • A tough year – but also opportunities
              • Providers should heavily promote regular savings schemes
                • Accessibility issues are set to become increasingly important
                  • Innovative interest-rate solutions will be vital
                  • Market in Brief

                    • Economic downturn will impact on consumers’ savings habits
                      • Retail savings balances totalled £1.1 billion at the end of 2008
                        • Lloyds Banking Group is the dominant force in the savings market
                          • Trade perspective: Low rates create the principal challenge
                            • Mintel’s research findings: Product ownership
                              • Mintel’s research findings: Favoured account providers
                                • Mintel’s research findings: Attitudes towards saving
                                • Internal Market Environment

                                  • Key points
                                    • Base rates have been reduced to an historically low level
                                      • Figure 1: Bank of England base rate, end of quarter, Q1 1972-Q1 2009
                                    • Savings rates have tumbled in the last few months
                                      • Figure 2: Average quoted deposit interest rates at banks and building societies, January 2004-February 2009
                                    • The low-interest-rate environment creates a number of challenges
                                      • Wholesale market turmoil has driven up demand for retail funds
                                        • The banking crisis will continue to impact on consumer sentiment
                                          • Raising the protection limits will have eased consumer fears
                                          • Broader Market Environment

                                            • Key points
                                              • The economic downturn will impact on consumers’ ability to save
                                                • Debt repayment will increasingly become a priority
                                                  • Precautionary saving may stimulate the savings habit
                                                    • The savings ratio has actually increased in recent quarters
                                                      • Figure 3: Household savings ratio, seasonally adjusted, Q1 2004-Q4 2008
                                                    • Rising ISA allowances will provide a boost to the savings market
                                                      • Population trends will impact on demand for savings accounts
                                                        • Figure 4: UK population, by age bracket, 1992-2016
                                                    • Competitive Context

                                                      • Key points
                                                        • Deposit accounts compete with investments and everyday spending
                                                          • Stockmarket decline has hit equity-based investments
                                                            • Figure 5: FTSE 100 Index, end of month, January 1994-March 2009
                                                          • Property market downturn makes housing a less attractive option
                                                            • Figure 6: Average UK house price, seasonally adjusted, January 2006-March 2009
                                                        • Strengths and Weaknesses in the Market

                                                            • Figure 7: Strengths and weaknesses in the deposit-based savings account market
                                                          • Strengths
                                                            • Weaknesses
                                                            • Who’s Innovating?

                                                              • Key points
                                                                • Maximising rates of interest will be the key focus of innovation
                                                                • Trade Perspective

                                                                    • The low-interest-rate environment represents the key challenge
                                                                      • Precautionary saving could stimulate some growth in balances
                                                                        • Innovation will focus on maximising the interest savers can earn
                                                                          • Increasing popularity of the internet looks set to continue
                                                                            • Increased market concentration could reduce competitive forces
                                                                            • Market Size and Forecast

                                                                              • Key points
                                                                                • Retail savings balances totalled £1.1 billion at the end of 2008
                                                                                  • Figure 8: Retail savings balances outstanding, 2004-09
                                                                                • A number of factors will constrain future growth in balances…
                                                                                  • …but a rise in precautionary saving could stimulate the market
                                                                                    • The value of deposits in time accounts has grown in recent years
                                                                                      • Figure 9: Number and value of individual interest-bearing sight and time accounts (MBBG only), 2003-08
                                                                                    • More than 30 million adults hold a deposit or savings account
                                                                                      • Figure 10: Ownership of deposit or savings accounts and NS&I products, December 2008
                                                                                    • Cash ISAs are a key segment of the deposit-based savings market
                                                                                      • Figure 11: Cash ISA balances outstanding, 2003-08
                                                                                    • Sales of cash ISAs increased by 10% in 2008
                                                                                      • Figure 12: Number of mini cash ISAs receiving subscriptions and the value of gross subscriptions, 2002/03-2007/08
                                                                                    • Forecast
                                                                                      • Balances to rise as individuals shore up savings
                                                                                        • Figure 13: Forecast of retail savings balances outstanding, 2004-14
                                                                                      • Factors used in the forecast
                                                                                      • Market Share

                                                                                        • Key points
                                                                                          • Lloyds Banking Group is the dominant force in the savings market
                                                                                            • Figure 14: Estimated deposit-based savings account volume market share, by savings brands, December 2008
                                                                                          • Market concentration has increased in the last couple of years
                                                                                            • Figure 15: Combined volume market share of top five deposit-based savings account providers, by financial services group, 2006 and 2008
                                                                                        • Companies and Products

                                                                                          • Key points
                                                                                            • There have been significant changes to the operating landscape
                                                                                              • The Lloyds/HBOS merger has created a savings colossus
                                                                                                • A number of leading banks are now partly, or wholly, in state hands
                                                                                                  • Santander has increased its presence within the UK savings market
                                                                                                    • Nationwide has driven consolidation in the building society sector
                                                                                                      • Co-operative Bank and Britannia are set to form a mutual alliance
                                                                                                      • Brand Elements

                                                                                                          • Brand map
                                                                                                            • Figure 16: Attitudes and usage of deposit and savings account brands, March 2009
                                                                                                          • Nationwide
                                                                                                            • What the brand is trying to achieve
                                                                                                              • What the consumer thinks
                                                                                                                • Figure 17: Attitudes towards the Nationwide brand, March 2009
                                                                                                              • Northern Rock
                                                                                                                • What the brand is trying to achieve
                                                                                                                  • What the consumer thinks
                                                                                                                    • Figure 18: Attitudes towards the Northern Rock brand, March 2009
                                                                                                                  • Halifax
                                                                                                                    • What the brand is trying to achieve
                                                                                                                      • What the consumer thinks
                                                                                                                        • Figure 19: Attitudes towards the Halifax brand, March 2009
                                                                                                                      • The Co-operative Bank
                                                                                                                        • What the brand is trying to achieve
                                                                                                                          • What the consumer thinks
                                                                                                                            • Figure 20: Attitudes towards The Co-operative Bank brand, March 2009
                                                                                                                          • Barclays
                                                                                                                            • What the brand is trying to achieve
                                                                                                                              • What the consumer thinks
                                                                                                                                • Figure 21: Attitudes towards the Barclays brand, March 2009
                                                                                                                              • Brand qualities of deposit and savings account brands
                                                                                                                                • Nationwide safest, but Barclays as competent
                                                                                                                                  • Figure 22: Personalities of various deposit and savings account brands, March 2009
                                                                                                                                • Experience of deposit and savings account brands
                                                                                                                                  • Halifax most experienced, but big banks dominate
                                                                                                                                    • Figure 23: Consumer usage of various deposit and savings account brands, March 2009
                                                                                                                                  • Brand intentions for deposit and savings account brands
                                                                                                                                    • Nationwide most considered, Northern Rock most off-putting
                                                                                                                                      • Figure 24: Consideration of various deposit and savings account brands, March 2009
                                                                                                                                    • Brand satisfaction for deposit and savings account brands
                                                                                                                                      • Nationwide and The Co-operative seen as most excellent
                                                                                                                                        • Figure 25: Satisfaction with various deposit and savings account brands, March 2009
                                                                                                                                      • Brand commitment to deposit and savings account brands
                                                                                                                                        • Lloyds leads for loyalty
                                                                                                                                          • Figure 26: Commitment to various deposit and savings account brands, March 2009
                                                                                                                                        • Round-up
                                                                                                                                        • Brand Communication and Promotion

                                                                                                                                          • Key points
                                                                                                                                            • Savings account providers invest heavily in advertising
                                                                                                                                              • Total industry adspend amounted to £100 million in 2008
                                                                                                                                                • Figure 27: Advertising expenditure on savings accounts, 2004-08
                                                                                                                                              • Instant-access and regular savings accounts are heavily promoted
                                                                                                                                                • Figure 28: Advertising expenditure on savings accounts, by product categories, 2007 and 2008
                                                                                                                                              • The press is the main advertising medium used by savings providers
                                                                                                                                                • Figure 29: Advertising expenditure on savings accounts, by media type, 2007 and 2008
                                                                                                                                              • ING Direct tops the savings account adspend table
                                                                                                                                                • Figure 30: Advertising expenditure on savings accounts, by organisation, 2007 and 2008
                                                                                                                                            • Channels to Market

                                                                                                                                              • Key points
                                                                                                                                                • Combined branch network has declined by a fifth in the last decade
                                                                                                                                                  • Figure 31: UK bank and building society combined branch networks, 1997-2007
                                                                                                                                                • Telephone and internet continue to gain in popularity
                                                                                                                                                  • Figure 32: Number of personal customers registered to access accounts, by telephone and computer (MBBG only), 2002-07
                                                                                                                                                • The branch will retain a key position in the distribution mix…
                                                                                                                                                  • …although the trend to multichannel strategies will continue
                                                                                                                                                  • The Consumer – Product Ownership

                                                                                                                                                    • Key points
                                                                                                                                                      • Survey background
                                                                                                                                                        • More than six in ten adults hold a deposit or savings account
                                                                                                                                                            • Figure 33: Ownership of savings and investment products, December 2008
                                                                                                                                                          • Almost eight in ten ABC1 over-55s own a savings account
                                                                                                                                                            • Figure 34: Savings and investment ownership, by gender, age and socio-economic group, December 2008
                                                                                                                                                          • A large proportion of homeowners hold a deposit account
                                                                                                                                                            • Figure 35: Savings and investment ownership, by marital status, lifestage, ACORN group, working status, income and household tenure, December 2008
                                                                                                                                                          • Most M&S and Waitrose customers own a savings account
                                                                                                                                                            • Figure 36: Savings and investment ownership, by TV region, technology users, newspaper readership and supermarket usage, December 2008
                                                                                                                                                          • Six in ten 35-44-year-olds hold an instant-access account
                                                                                                                                                            • Figure 37: Deposit-based savings ownership, by gender, age and socio-economic group, December 2008
                                                                                                                                                          • A third of consumers hold more than one type of savings account
                                                                                                                                                            • Figure 38: Number of types of deposit-based savings account held, by consumers, December 2008
                                                                                                                                                          • A quarter of the single-product group hold a cash ISA
                                                                                                                                                            • Figure 39: Ownership of deposit-based savings accounts, by number of types of deposit-based savings account held, December 2008
                                                                                                                                                          • Almost half of instant-access account holders also own a cash ISA
                                                                                                                                                            • Figure 40: Ownership of deposit-based savings accounts, by deposit-based savings products, December 2008
                                                                                                                                                        • The Consumer – Favoured Account Providers

                                                                                                                                                          • Key points
                                                                                                                                                            • A fifth of savers hold an account with Halifax
                                                                                                                                                                • Figure 41: Proportion of adult savers who hold a deposit account with each savings provider, December 2008
                                                                                                                                                              • HSBC has a comparatively young customer profile
                                                                                                                                                                • Figure 42: Proportion of adult savers who hold a deposit account with the leading players, by gender, age and socio-economic group, December 2008
                                                                                                                                                              • Nationwide has a strong bias towards ABC1 third age savers
                                                                                                                                                                • Figure 43: Proportion of adult savers who hold a deposit account with the leading players, by marital status, lifestage, Mintel’s Special Groups, ACORN group and TV region, December 2008
                                                                                                                                                              • A fifth of broadsheet readers hold a savings account with Barclays
                                                                                                                                                                • Figure 44: Proportion of adult savers who hold a deposit account with the leading players, by working status, income, household tenure, technology users and newspaper readership, December 2008
                                                                                                                                                              • Almost three in ten ‘wealthy’ savers hold an account with Halifax
                                                                                                                                                                • Figure 45: Proportion of adult savers who hold a deposit account with the leading players, by total value of savings and investments, December 2008
                                                                                                                                                            • The Consumer – Attitudes towards Saving

                                                                                                                                                              • Key points
                                                                                                                                                                • Three in ten adults would save regularly if they had the cash
                                                                                                                                                                    • Figure 46: Level of agreement with statements about saving money, by gender, December 2008
                                                                                                                                                                  • Highlighting ‘lifestyle’ goals could encourage young adults to save
                                                                                                                                                                    • Figure 47: Level of agreement with statements about saving money, by age, December 2008
                                                                                                                                                                  • Almost a third of ABs are focused on debts rather than saving
                                                                                                                                                                    • Figure 48: Level of agreement with statements about saving money, by socio-economic group, December 2008
                                                                                                                                                                  • Accessibility is the key issue for deposit account holders
                                                                                                                                                                    • Figure 49: Level of agreement with statements about saving money, by savings and investment ownership groups, December 2008
                                                                                                                                                                  • Influence of interest rates rises in line with the amounts saved
                                                                                                                                                                    • Figure 50: Level of agreement with statements about saving money, by total value of savings and investments, December 2008
                                                                                                                                                                  • One in five savers appreciate the convenience of online accounts
                                                                                                                                                                      • Figure 51: Level of agreement with statements about savings account management, by gender, December 2008
                                                                                                                                                                    • The recession is boosting the savings habit among the 25-34s
                                                                                                                                                                      • Figure 52: Level of agreement with statements about savings account management, by age, December 2008
                                                                                                                                                                    • ABs are unlikely to remain loyal to one savings provider
                                                                                                                                                                      • Figure 53: Level of agreement with statements about savings account management, by socio-economic group, December 2008
                                                                                                                                                                    • Internet accounts appeal to a large minority of ‘wealthy’ savers
                                                                                                                                                                      • Figure 54: Level of agreement with statements about savings account management, by total value of savings and investments, December 2008
                                                                                                                                                                  • The Consumer – Targeting Opportunities

                                                                                                                                                                    • Key points
                                                                                                                                                                      • Dissecting the workforce according to attitudes towards saving
                                                                                                                                                                          • Figure 55: Segmentation based upon consumers’ attitude towards saving, December 2008
                                                                                                                                                                        • Debt Clearers
                                                                                                                                                                          • Good Intentions
                                                                                                                                                                            • Hot Targets
                                                                                                                                                                              • Disinterested
                                                                                                                                                                                • There are large variations in the cluster group profiles
                                                                                                                                                                                  • Figure 56: Segmentation based upon consumers’ attitude towards saving, by gender, age, socio-economic group, lifestage, ACORN group, tenure, TV region and newspaper readership, December 2008
                                                                                                                                                                                • Almost a third of Hot Targets are attracted to online accounts
                                                                                                                                                                                  • Figure 57: Agreement with statements about savings account management, by typologies based upon consumers’ attitude towards saving, December 2008
                                                                                                                                                                                • Almost four in ten Lloyds TSB customers are Hot Targets
                                                                                                                                                                                  • Figure 58: Segmentation based upon consumers’ attitude towards saving, by savings institution, December 2008

                                                                                                                                                                              Companies Covered

                                                                                                                                                                              • Abbey
                                                                                                                                                                              • Alliance & Leicester
                                                                                                                                                                              • Asda Group Ltd
                                                                                                                                                                              • Bank of England
                                                                                                                                                                              • Barclays Bank plc
                                                                                                                                                                              • Birmingham Midshires
                                                                                                                                                                              • Bradford & Bingley plc
                                                                                                                                                                              • Britannia Building Society
                                                                                                                                                                              • British Bankers' Association (BBA)
                                                                                                                                                                              • Building Societies Association
                                                                                                                                                                              • Catholic Building Society
                                                                                                                                                                              • Chelsea Building Society
                                                                                                                                                                              • Cheltenham & Gloucester plc
                                                                                                                                                                              • Clydesdale Bank
                                                                                                                                                                              • Co-operative Group
                                                                                                                                                                              • Dunfermline Building Society
                                                                                                                                                                              • Financial Services Authority (The)
                                                                                                                                                                              • First Direct
                                                                                                                                                                              • Food Marketing Institute
                                                                                                                                                                              • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                                                              • HSBC Private Bank (UK) Limited
                                                                                                                                                                              • ING Direct
                                                                                                                                                                              • Lloyds Banking Group
                                                                                                                                                                              • Marks & Spencer
                                                                                                                                                                              • Nationwide Building Society
                                                                                                                                                                              • NatWest
                                                                                                                                                                              • Northern Rock plc
                                                                                                                                                                              • Office for National Statistics
                                                                                                                                                                              • Royal Bank of Scotland Group plc
                                                                                                                                                                              • Scarborough Building Society
                                                                                                                                                                              • Scottish Friendly Assurance Society Ltd
                                                                                                                                                                              • Skipton Building Society
                                                                                                                                                                              • Waitrose
                                                                                                                                                                              • Yorkshire Building Society

                                                                                                                                                                              Deposit and Savings Accounts - UK - May 2009

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