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Saving and Investing for the Long-term - UK - February 2010

In this report, Mintel examines the market for long-term savings and investment products, from cash to equity-based investments and the issues facing providers, distributors and advisers. It considers whether we are a nation of savers or borrowers, and how the upheavals of the past two years have affected savings confidence and behaviour.

  • There has been a fundamental change in the investment climate since this report was last written, but even the combination of strong stockmarket growth and record low interest rates hasn't changed the UK consumers' fundamental dislike of risk-based investments.
  • The risk adverse mindset is reflected in the fact that relatively few people invest for speculative reasons. Instead, the key motivation for saving is security and stability. Investment returns are secondary to peace of mind.
  • Changes in university funding are having a major impact on the consumer mindset. Among those with children, education costs are now the main reason for saving.
  • The slowdown appears to have concentrated people's minds on the importance of saving. History shows that this may be a relatively short-lived trend, though. Providers who don't capitalise on this new mood of prudence may be missing a once-in-a-generation opportunity.
  • The internet is helping create a new breed of self-directed investor. The better-off, in particular, are making extensive use of online sources of advice.
  • Despite this, the 'hobby investor' - those who actively enjoy trying to get the most out of their savings - is still a niche market. The UK is a long way from the US in terms of mass-market interest in investment issues.

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Table of contents

  1. Issues in the Market

      • Key issues covered in the report
        • Product definitions
          • Individual savings account (ISA)
            • Fixed-interest securities
              • Investment bonds
                • Structured products
                  • Collective investments
                    • Abbreviations
                    • Future Opportunities

                      • Life after debt
                        • From a nation of borrowers to a nation of savers?
                          • The rise of behavioural economics
                            • Understanding the irrational consumer
                            • Market in Brief

                              • Engagement in savings and investment
                                • Product ownership and wealth
                                  • Attitudes towards risk, saving and investing
                                    • Investor behaviour
                                      • Attitudes towards financial advice
                                        • Sources of financial advice
                                          • Mixed growth in product sales
                                            • 2010 – an uncertain year in prospect
                                              • Market leaders
                                                • Distribution trends
                                                • Market Sentiment – A Year On

                                                  • Key points
                                                    • That was the year that was
                                                      • 2010 – the road to recovery?
                                                        • Low interest rates help support hard-pushed borrowers…
                                                          • … but savers suffer
                                                            • Recovery in the property and equity markets
                                                              • Regulation plays a role in the investment market
                                                              • Economic and Investment Climate

                                                                • Key points
                                                                  • Economic and investment overview
                                                                    • Key economic issues
                                                                      • Financial position of households
                                                                          • Figure 1: A tale of two recessions – the financial position of households June 1990-March 1992; April 2008-December 2009*
                                                                        • Fewer people struggling with their debts
                                                                          • Reducing the debt burden a consumer priority
                                                                            • A tough savings climate for income seekers…
                                                                              • … leading some to invest in structured products
                                                                                • Shifts in investment choices
                                                                                  • Surging stock markets
                                                                                    • Figure 2: FTSE 100 and FTSE All-Share indices, quarterly, March 2000-December 2009
                                                                                  • Stockmarket outlook less promising
                                                                                    • Despite falling property markets, people still like property investment
                                                                                    • Savings and Politics

                                                                                      • Key points
                                                                                        • Good prospects for savings and investment businesses
                                                                                          • Figure 3: Consumers’ intended savings, investment, borrowing and debt repayment, 2002-09*
                                                                                        • Improvement in both saving and spending climate
                                                                                          • Figure 4: Spending and saving climate, 2000-09
                                                                                        • The changing demographic structure of the UK
                                                                                          • Figure 5: UK population, by age groups, 1999, 2009 and 2017 (
                                                                                        • From family to retirement
                                                                                          • Figure 6: UK population, by lifestage, 1999-2013
                                                                                        • More young people are saving
                                                                                          • Figure 7: Savings and investment intentions, under-30s, December 2006-09
                                                                                        • Savings policy (or lack of it) set to become a key election issue
                                                                                          • Government action and the savings culture
                                                                                            • Significant government-led product development
                                                                                              • Wealth has been created, but so has greater inequality
                                                                                                • Shaping the future savings landscape…
                                                                                                  • … while maintaining profitability
                                                                                                    • The regulatory burden on intermediaries
                                                                                                      • Company stability and opaque product offerings a consumer concern
                                                                                                        • More people turn to Financial DIY although many will need advice
                                                                                                        • Consumer and Investor Sentiment

                                                                                                          • Key points
                                                                                                            • Confidence recovering in 2009 and up in January 2010
                                                                                                              • Figure 8: UK consumer confidence index, January 1988-2010
                                                                                                            • Savings and investment expected activity back in vogue
                                                                                                              • Figure 9: Consumers’ expected savings/investment activity, 2002-09
                                                                                                            • Intended cash savings activity improving despite low interest rates
                                                                                                              • Figure 10: Intended saving activities, Q3/Q4 2002-Q4 2009/Q1 2010
                                                                                                            • Strong rise in life & pension intentions
                                                                                                                • Figure 11: Expected Life & Pensions purchase activity, Q3/Q4 2002-Q4 2008/Q1 2010
                                                                                                              • Weak investor sentiment towards equities – a preference for bonds
                                                                                                                • Figure 12: Expected investment activity, Q3/Q4 2002-Q4 2008/Q1 2010*
                                                                                                                • Figure 13: Expected investment activity, High earners vs All adults, December 2009
                                                                                                              • Slump in mortgage intentions; property purchase intentions weakening
                                                                                                                • Figure 14: Expected mortgage and property purchase activity, Q3/Q4 2002-Q4 2008/Q1 2010
                                                                                                              • Recovery in financial wellbeing
                                                                                                                • Figure 15: Financial wellbeing, 2001-10
                                                                                                              • Savings head the list of consumers’ changing priorities
                                                                                                                  • Figure 16: Financial priorities over the past year and the coming year, November 2009
                                                                                                              • Retail Investment Market Size

                                                                                                                • Key points
                                                                                                                  • Regulated retail investment product sales
                                                                                                                    • Investment bonds accounted for three fifths of investment sales
                                                                                                                      • Figure 17: Number of new regulated investment sales, by product type year to March 2009
                                                                                                                  • Sector Performance

                                                                                                                    • Key points
                                                                                                                      • The value of ISA funds grew by 24% in 2009…
                                                                                                                        • Figure 18: Value of funds held in the two ISA components, 2005-09
                                                                                                                      • … while contributions were up 8% on 2007/08
                                                                                                                        • Figure 19: New ISA business, by asset class, 2000/01-2007/08
                                                                                                                      • Equities regain some appeal as market picks up
                                                                                                                        • Figure 20: Proportion of adults holding investments in stocks and shares or unit trusts, either individually or jointly with another person, 1985, 1989, 1996-2009
                                                                                                                      • The changing face of shareholding
                                                                                                                        • Falling dividends hit income investors
                                                                                                                          • Figure 21: Dividend payout performance, UK listed companies, 2009
                                                                                                                        • Surge in unit trust/OEIC net retail sales
                                                                                                                          • Figure 22: UK domiciled unit trust/oeic net retail sales, 2000-09
                                                                                                                        • Signs of a defensive approach to asset allocation
                                                                                                                          • A herd mentality?
                                                                                                                            • Value of corporate bond funds up sharply
                                                                                                                              • Figure 23: Total assets held in UK corporate bond sector and all bond sector, 2005-09
                                                                                                                            • Investment bond appeals wanes
                                                                                                                              • Figure 24: Total number of new single-premium investment bond contracts and value of new premiums 2004-09
                                                                                                                            • Offshore bonds losing to UK providers
                                                                                                                              • Demand for guaranteed products
                                                                                                                              • Key Investment Product Providers

                                                                                                                                • Key points
                                                                                                                                  • Investment bonds
                                                                                                                                    • Leading providers
                                                                                                                                      • Fund managers
                                                                                                                                        • Invesco Perpetual keeps top spot
                                                                                                                                          • Figure 25: Top 20 unit trust and OEIC fund managers, by retail funds under management, December 2009
                                                                                                                                        • Leading players highlight the importance of ‘star’ managers
                                                                                                                                          • Fidelity maintains leading ISA fund provider leadership
                                                                                                                                            • Figure 26: Top ten ISA Managers by funds under management*, December 2009
                                                                                                                                        • Product Distribution

                                                                                                                                          • Key points
                                                                                                                                            • Around 50% of investment products and ISAs sold through banks and building societies
                                                                                                                                              • Figure 27: Investment sales, by channel, 2008/09
                                                                                                                                            • Intermediaries key sales channel for unit trusts/OEICs
                                                                                                                                              • Figure 28: Distribution channels in the Unit Trust/OEIC sector, gross retail sales, 2005-09
                                                                                                                                            • Fund supermarkets ahead in the ISA fund market
                                                                                                                                              • Figure 29: Gross retail sales of ISA funds by distribution channel, 2005-09
                                                                                                                                            • Co-funds, Skandia and Funds Network leading funds platforms
                                                                                                                                              • Bringing down the cost of direct investment
                                                                                                                                                • IFAs’ domination of investment bond distribution waning
                                                                                                                                                  • Figure 30: Investment bond distribution mix, by product category, based on total new premiums, 2009*
                                                                                                                                              • Consumers’ Product and Asset Ownership

                                                                                                                                                • Key points
                                                                                                                                                  • Rise in net worth of households in 2009
                                                                                                                                                    • Figure 31: Household net worth, 2004-09*
                                                                                                                                                  • 9% fall in financial assets in 2008
                                                                                                                                                    • Figure 32: Household financial net worth, by asset type, 2004-08
                                                                                                                                                  • Cash still leads the way – and ISA allowances still going to waste
                                                                                                                                                      • Figure 33: Saving and investment products own separately or jointly with partner, December 2009
                                                                                                                                                      • Figure 34: Saving and investment products own separately or jointly with partner, by household income and age group, December 2009
                                                                                                                                                    • Scotland shows the way with savings
                                                                                                                                                      • Figure 35: Saving and investment products own separately or jointly with partner, by region, GB, December 2009
                                                                                                                                                    • Nearly half of adults have one or no savings products
                                                                                                                                                      • Figure 36: Numbers of savings and investment products types held, December 2009
                                                                                                                                                    • Around 16% of the population have investible assets in excess of £50,000
                                                                                                                                                        • Figure 37: Overview of value of investible assets (excluding pensions and main residence), December 2009
                                                                                                                                                      • The benefits of broadening product ownership
                                                                                                                                                          • Figure 38: Number of savings and investment products owned, by value of investible assets (excluding pensions and property investment), December 2008
                                                                                                                                                      • The Consumer – Attitudes Towards Risk

                                                                                                                                                        • Key points
                                                                                                                                                          • Consumers may have to take on more risk
                                                                                                                                                              • Figure 39: Attitudes towards risk tolerance, December 2009
                                                                                                                                                              • Figure 40: Attitudes towards risk tolerance, by household income and age groups, December 2009
                                                                                                                                                            • Education is crucial
                                                                                                                                                              • Little willingness to ‘gamble’ with limited savings
                                                                                                                                                                • Figure 41: Attitudes towards risk tolerance by total value of saving and investment (nets), December 2009
                                                                                                                                                            • The Consumer – Reasons for Saving

                                                                                                                                                              • Key points
                                                                                                                                                                • Why save or invest?
                                                                                                                                                                    • Figure 42: Main reasons for saving and investing, December 2009
                                                                                                                                                                  • The impact of lifestage on saving motivations
                                                                                                                                                                    • Figure 43: Main reasons for saving and investing, by lifestage, December 2009
                                                                                                                                                                  • For a minority, investment becomes a hobby
                                                                                                                                                                      • Figure 44: Main reasons for saving and investing, by repertoire of saving and investment products own separately or jointly with partner, December 2009
                                                                                                                                                                  • The Consumer – Sources of Saving and Investment Advice

                                                                                                                                                                    • Key points
                                                                                                                                                                      • Friends, family and work colleagues main sources of advice
                                                                                                                                                                          • Figure 45: Sources of saving and investment advice used in the past, December 2008 and December 2009
                                                                                                                                                                        • Two main groups of professionally advised and non-advised groups among savers/investors
                                                                                                                                                                          • Professionally advised groups, profiles:
                                                                                                                                                                            • Non-professionally advised groups, profiles:
                                                                                                                                                                              • Banks used as main source of advice for all but the wealthy…
                                                                                                                                                                                  • Figure 46: Sources used for advice on saving and investment in the past by total value of saving and investment (nets), December 2009
                                                                                                                                                                                • … and are crucial among moderate savers
                                                                                                                                                                                  • Figure 47: Sources of advice, by number of savings and investment product types held, December 2009
                                                                                                                                                                              • The Consumer – Attitudes towards Savings and Investment Advice

                                                                                                                                                                                • Key points
                                                                                                                                                                                  • Nearly half of consumers do their own research – few believe the worst of the financial crisis is over
                                                                                                                                                                                      • Figure 48: Statements on sources of financial advice savings and investment products, December 2009
                                                                                                                                                                                    • Troubled times leading to a desire for expert advice…
                                                                                                                                                                                      • … but an unwillingness to pay for this advice
                                                                                                                                                                                        • Education + affluence = engagement
                                                                                                                                                                                          • Figure 49: Most popular statements on sources of financial advice savings and investment products by gender and socio-demographic group, December 2009
                                                                                                                                                                                        • Are younger savers more prepared to take control of their finances?
                                                                                                                                                                                          • Figure 50: Most popular statements on sources of financial advice savings and investment products, by household income and age, December 2009
                                                                                                                                                                                        • Super-savers prepared to pay for advice…
                                                                                                                                                                                          • Figure 51: Most popular statements on sources of financial advice savings and investment products, by number of savings & investment products held, December 2009
                                                                                                                                                                                        • … as are those with sizeable sums to invest
                                                                                                                                                                                          • Figure 52: Statements on sources of financial advice savings and investment products, by total value of saving and investment, December 2009
                                                                                                                                                                                        • Commission bias fears greatest among affluent 35-44-year-olds
                                                                                                                                                                                          • … and among those relying on workplace advice
                                                                                                                                                                                            • Figure 53: Agreement with statements about savings and investment advice, by sources of advice used, December 2008
                                                                                                                                                                                          • Greatest scepticism about financial advisers among saver-investors
                                                                                                                                                                                            • Figure 54: Number of savings and investment product types held by Q4
                                                                                                                                                                                        • Appendix – Consumers’ Product and Asset Ownership

                                                                                                                                                                                            • Figure 55: Most popular saving and investment products own seprately or jointly with partner, by demographics, December 2009
                                                                                                                                                                                            • Figure 56: Next most popular saving and investment products own seprately or jointly with partner by demographics, December 2009 (continued)
                                                                                                                                                                                            • Figure 57: Other saving and investment products own seprately or jointly with partner, by demographics, December 2009 (continued)
                                                                                                                                                                                            • Figure 58: Most popular repertoire of saving and investment products own seprately or jointly with partner, by demographics, December 2009
                                                                                                                                                                                            • Figure 59: Next most popular repertoire of saving and investment products own seprately or jointly with partner, by demographics, December 2009 (continued)
                                                                                                                                                                                            • Figure 60: Most popular total value of saving and investment (nets), by demographics, December 2009
                                                                                                                                                                                            • Figure 61: Next most popular total value of saving and investment (nets), by demographics, December 2009 (continued)
                                                                                                                                                                                        • Appendix – The Consumer – Attitudes Towards Risk

                                                                                                                                                                                            • Figure 62: Attitudes towards risk tolerance, by demographics, December 2009
                                                                                                                                                                                        • Appendix – The Consumer – Reasons for Saving

                                                                                                                                                                                            • Figure 63: Most popular main reasons for saving and investing, by demographics, December 2009
                                                                                                                                                                                            • Figure 64: Next most popular main reasons for saving and investing, by demographics, December 2009 (continued)
                                                                                                                                                                                        • Appendix – The Consumer – Sources of Savings and Investment Advice

                                                                                                                                                                                            • Figure 65: Most popular sources used for advice on saving and investment in the past, by demographics, December 2009
                                                                                                                                                                                            • Figure 66: Next most popular sources used for advice on saving and investment in the past, by demographics, December 2009 (continued)
                                                                                                                                                                                            • Figure 67: Other sources used for advice on saving and investment in the past, by demographics, December 2009 (continued)
                                                                                                                                                                                        • Appendix – The Consumer – Attitudes Towards Savings and Investment Advice

                                                                                                                                                                                            • Figure 68: Most popular statements on sources of financial advice savings and investment products, by demographics, December 2009
                                                                                                                                                                                            • Figure 69: Next most popular statements on sources of financial advice savings and investment products, by demographics, December 2009 (continued)

                                                                                                                                                                                        Companies Covered

                                                                                                                                                                                        • Abbey
                                                                                                                                                                                        • Aberdeen Asset Management PLC
                                                                                                                                                                                        • Aegon UK
                                                                                                                                                                                        • AIG Group (American International Group Inc)
                                                                                                                                                                                        • Alliance & Leicester
                                                                                                                                                                                        • Aon Corporation
                                                                                                                                                                                        • Artemis Investment Management
                                                                                                                                                                                        • Asda Group Ltd
                                                                                                                                                                                        • Association of British Insurers
                                                                                                                                                                                        • Aviva Plc
                                                                                                                                                                                        • AXA UK plc
                                                                                                                                                                                        • Bank of England
                                                                                                                                                                                        • Bank of New York Mellon Corporation, The
                                                                                                                                                                                        • BlackRock, Inc.
                                                                                                                                                                                        • Canada Life Limited
                                                                                                                                                                                        • Capita Insurance Services
                                                                                                                                                                                        • Clerical Medical Investment Group Ltd
                                                                                                                                                                                        • Co-operative Group
                                                                                                                                                                                        • Cofunds
                                                                                                                                                                                        • ComPeer Limited
                                                                                                                                                                                        • Equitable Life Assurance Society (The)
                                                                                                                                                                                        • Fidelity Investment Services Limited
                                                                                                                                                                                        • Financial Services Authority (The)
                                                                                                                                                                                        • First State Investments
                                                                                                                                                                                        • Freeview
                                                                                                                                                                                        • Friends Provident plc
                                                                                                                                                                                        • Gartmore Investment Management plc
                                                                                                                                                                                        • Gfk NOP
                                                                                                                                                                                        • Government Actuary's Department (GAD)
                                                                                                                                                                                        • Grupo Santander Central Hispano S.A.
                                                                                                                                                                                        • Halifax Mortgage Services
                                                                                                                                                                                        • Hargreaves Lansdown Plc
                                                                                                                                                                                        • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                                                                        • HSBC Private Bank (UK) Limited
                                                                                                                                                                                        • International Monetary Fund
                                                                                                                                                                                        • Invesco Perpetual
                                                                                                                                                                                        • Investec
                                                                                                                                                                                        • Investment Management Association
                                                                                                                                                                                        • John Gilbert Financial Research
                                                                                                                                                                                        • JPMorgan Invest LLC (BrownCo)
                                                                                                                                                                                        • Jupiter Unit Trust Managers Ltd
                                                                                                                                                                                        • Land Registry
                                                                                                                                                                                        • Legal & General Investment Management
                                                                                                                                                                                        • Lehman Brothers [UK]
                                                                                                                                                                                        • Lloyds Banking Group
                                                                                                                                                                                        • London Stock Exchange plc
                                                                                                                                                                                        • M&G Group
                                                                                                                                                                                        • Market & Opinion Research International (MORI)
                                                                                                                                                                                        • Merrill Lynch (UK)
                                                                                                                                                                                        • National Association of Pension Funds
                                                                                                                                                                                        • National Lottery Commission
                                                                                                                                                                                        • National Savings & Investments
                                                                                                                                                                                        • Office of Fair Trading
                                                                                                                                                                                        • Prudential plc
                                                                                                                                                                                        • Resolution plc
                                                                                                                                                                                        • Royal Bank of Scotland Group plc
                                                                                                                                                                                        • Royal London Group
                                                                                                                                                                                        • Scottish Widows Bank plc
                                                                                                                                                                                        • Skandia UK
                                                                                                                                                                                        • St James' Place Plc
                                                                                                                                                                                        • Standard Life Investments
                                                                                                                                                                                        • Sterling Insurance Group
                                                                                                                                                                                        • SWIP Islamic Global Equity Fund
                                                                                                                                                                                        • Tesco Plc
                                                                                                                                                                                        • Threadneedle Investment Services Ltd
                                                                                                                                                                                        • Virgin Money
                                                                                                                                                                                        • Winterthur Life UK Limited
                                                                                                                                                                                        • Zurich Financial Services

                                                                                                                                                                                        Saving and Investing for the Long-term - UK - February 2010

                                                                                                                                                                                        US $2,648.76 (Excl.Tax)