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Savings - Ireland - February 2012

Since Mintel last examined the savings market in Ireland (March 2010), the challenges facing both consumers and providers have increased. Disposable incomes have fallen significantly, making it more difficult for consumers to save on a regular basis. Many consumers have been forced to dip into existing savings to cover shortfalls in income. Although institutions are under intense pressure to attract retail deposits, low base rates make it difficult to offer a truly appealing return to consumers. For NI consumers, there is the additional factor of high inflation, which makes it extremely difficult for NI consumers to get any real return on savings. The one positive from the current economic climate is that the extremely low level of consumer confidence and general anxiety as to what the future holds – among both NI and RoI consumers – has strengthened consumer commitment towards precautionary saving. This report examines the current state of the savings market in Ireland and assesses the likely direction of the financial savings industry in the years to come.

Some questions answered in the report include:

  • How has the recent 'recession experience' affected consumers' attitudes towards debt, spending and saving?
  • What effect is the current economic situation – particularly with regards to interest rates and inflation – having on consumers' ability and eagerness to save?
  • How appealing are the main alternatives to traditional saving – specifically, property, pensions and equities – to consumers in the current environment?
  • How has savings account ownership been affected by the recent economic downturn?
  • What are the main factors taken into consideration by consumers when choosing a savings account provider?

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Table of contents

  1. Issues in the Market

      • Key themes
        • Definitions
          • Data sources
            • Abbreviations
            • Insights and Opportunities

              • Straightforward approach may do more than 'gimmicks'
                • Alter consumer perspectives by shifting focus from interest rates
                • Market in Brief

                  • Irish consumers' savings valued at more than €130 billion
                    • Economic challenges remain for NI and RoI
                      • Low confidence sets scene for precautionary saving
                        • Changing attitudes towards borrowing and debt
                          • Government policy encouraging and discouraging saving
                            • Consumers more aware of finance, but still lack certainty
                              • Low base rates hit returns on savings
                                • No clear alternative to putting cash on deposit
                                  • Instant-access accounts favoured among Irish consumers
                                    • Majority of consumers own a savings account
                                      • Around 30% of consumers add to savings each month
                                        • Interest rate the most important factor when choosing a provider
                                        • Fast Forward Trends

                                            • Trend 1: Boomerang generation
                                              • What’s it about?
                                                • What we’ve seen
                                                  • What next?
                                                    • Trend 2: Retired for hire
                                                      • What’s it about?
                                                        • What we’ve seen
                                                          • What next?
                                                          • Internal Market Environment

                                                            • Key points
                                                              • RoI consumers losing appetite for 'living on credit'...
                                                                • Figure 1: Agreement with the statement 'If there's something I want, I save up for it', NI and RoI, 2007-11
                                                              • ...alongside increasing aversion to being in debt
                                                                • Figure 2: Agreement with the statement 'I don't like the idea of being in debt', NI and RoI, 2007-11
                                                              • RoI consumers focus on saving, NI consumers on debt reduction
                                                                • Figure 3: Spending priorities over the next 12 months, NI and RoI, June 2011
                                                                • Figure 4: Main reason for saving among consumers who save regularly, RoI, February 2012
                                                              • NI consumers more financially 'cautious' than RoI consumers
                                                                • Figure 5: Agreement with statement 'I prefer enjoying my money (spending it) rather than saving it', by gender, age and socio-economic background, NI and RoI, 2011
                                                              • Increased tax on interest discouraging savers
                                                                • Figure 6: Agreement with the statement 'Government policy discourages saving', RoI, July 2011-January 2012
                                                              • Consumers more aware of finance – but not that aware
                                                                  • Figure 7: Agreement with the statement 'I am more aware of personal finance than I used to be', NI and RoI, 2007-11
                                                                  • Figure 8: Agreement with the statement 'I feel fairly knowledgeable in the financial field', by gender, age and socio-economic background, NI and RoI, 2011
                                                                • Bank charges an indirect impediment to saving
                                                                  • Steady decline in trust in banks among RoI consumers
                                                                    • Figure 9: Agreement with statement 'I trust banks/building societies to look after my money', NI and RoI, 2009-11
                                                                  • Low base rates hit returns on savings...
                                                                    • Figure 10: Official Bank of England (BoE) and European Central Bank (ECB) interest rates, January 2008-January 2012
                                                                    • Figure 11: Average interest rates for deposits redeemable at notice from households, UK (incl. NI) and RoI, 2003-11
                                                                  • ...while inflation eats away already scant gains for NI savers
                                                                    • Figure 12: Harmonised index of consumer prices, annual % changes, July 2011-November 2011
                                                                  • Banks slashing margins and resorting to bonus rates
                                                                    • Government guarantee schemes important to consumers
                                                                    • Broader Market Environment

                                                                      • Key points
                                                                        • Challenges remain for both economies
                                                                          • Figure 13: GDP growth, actual and forecast, UK, NI and RoI, 2009-12
                                                                        • Little prospect of unemployment falling in near future
                                                                            • Figure 14: Unemployment rate (percentage), NI, 2008-11
                                                                            • Figure 15: Unemployment rate (percentage), RoI, 2007-12
                                                                            • Figure 16: Total in employment (000s), RoI, 2005-11
                                                                          • Average weekly incomes up or steady – but disposable income down
                                                                            • Figure 17: Average gross weekly earnings, by gender, NI, 2007-11
                                                                            • Figure 18: Average weekly earnings, by sector, RoI, Q3 2009-Q3 2011
                                                                            • Figure 19: Consumer price index, RoI, 2007-11
                                                                            • Figure 20: Agreement with statements relating to personal financial situation, RoI and NI, January 2012
                                                                          • Consumers concerned about meeting day-to-day expenses
                                                                            • Figure 21: Issues concerning consumers, NI and RoI, 2011
                                                                          • Consumer confidence up in RoI, declining in UK (including NI)
                                                                              • Figure 22: Consumer Sentiment/Confidence Index, UK (incl. NI) and RoI, February 2009-February 2012
                                                                            • Little optimism for what the future holds
                                                                              • Figure 23: Consumer expectations, UK (incl. NI) and RoI, December 2010-January 2012
                                                                              • Figure 24: Consumers' views on whether own household income will be higher, lower or the same in six months' time, UK (incl. NI), 2004-11
                                                                            • Online banking on course to be the future of savings
                                                                              • Figure 25: Consumers who have an internet connection (broadband or dial-up) at home, NI and RoI, 2004-11
                                                                              • Figure 26: Consumers who have used the internet in the last 12 months, by age, NI and RoI, 2011
                                                                              • Figure 27: How often consumers access the internet, NI and RoI, 2011
                                                                          • Competitive Context

                                                                            • Key points
                                                                              • Disappointing returns for pension funds in 2011
                                                                                • RoI pension funds lose almost 3.5% in 2011
                                                                                  • Figure 28: Group pension managed fund returns, RoI, 31 December 2011
                                                                                • UK (including NI) pension funds down 0.9% in 2011
                                                                                  • Figure 29: UK (incl. NI) pension funds, weighted average returns, 2007-11
                                                                                • Consumers questioning their trust in pensions
                                                                                  • Property loses appeal – but may soon regain it
                                                                                    • RoI property may once again represent a good investment
                                                                                      • Figure 30: House price index, RoI, 2005-11
                                                                                      • Figure 31: Residential property prices, annual % changes, 2006-11
                                                                                      • Figure 32: Index of residential property sales values and rental values, RoI, December 2006-December 2011
                                                                                      • Figure 33: Rental yields on residential property, RoI, December 2011
                                                                                    • Property investment returning to favour in NI
                                                                                      • Figure 34: Residential property values, annual % change, NI, 2007-11
                                                                                      • Figure 35: Average residential property prices, UK, Q4 2011
                                                                                      • Figure 36: Annual rates of return on buy-to-let investment, UK average and NI, Q4 2011
                                                                                    • Equities an option – but not for the faint-hearted
                                                                                        • Figure 37: FTSE 100, FTSE All-Share and ISEQ Overall, index value, February 2007-February 2012
                                                                                        • Figure 38: Market capitalisation of equities traded on the ISEQ, 2004-11
                                                                                        • Figure 39: Agreement with the statement 'Owning stocks and shares is too risky an investment for me’, NI and RoI, 2007-11
                                                                                    • Strengths and Weaknesses

                                                                                      • Strengths
                                                                                        • Weaknesses
                                                                                        • Who’s Innovating?

                                                                                          • Key points
                                                                                            • Competitive offers to draw customers in
                                                                                              • Emphasis on security
                                                                                              • Market Value

                                                                                                • Key points
                                                                                                  • RoI consumers' savings valued at €91 billion (in RoI institutions)
                                                                                                    • Figure 40: Total deposits from private households, € billion, RoI, 2003-11
                                                                                                  • RoI household deposits down €7.8 billion since start of 2010
                                                                                                    • Figure 41: Annual transaction in private household deposits, RoI, 2004-11
                                                                                                    • Figure 42: Total private household deposits, RoI, January 2010-December 2011
                                                                                                  • Evidence of RoI consumers moving savings abroad
                                                                                                    • Paradox of total deposits falling while household savings ratio increases
                                                                                                      • Figure 43: Household net saving rate, actual and forecast, RoI, 2006-11
                                                                                                    • NI consumers' savings valued at £36.7 billion (€42.2 billion)
                                                                                                      • Figure 44: Total deposits from private households, NI, 2003-11
                                                                                                    • Annual increase in savings comes to a halt in 2009
                                                                                                      • Figure 45: Annual increase in total household savings, NI, 2004-11
                                                                                                    • NI consumers' focus on debt reduction – not saving
                                                                                                      • NI savings stay stable despite economic turmoil
                                                                                                        • Savings to total €138 billion in 2012, €159 billion in 2016
                                                                                                          • Figure 46: Projected household savings ratio, % of disposable household income, UK (incl. NI) and RoI, 2011-13
                                                                                                          • Figure 47: Actual, estimated and projected household savings rate, % of disposable income, UK (incl. NI) and RoI, 2004-13
                                                                                                          • Figure 48: Value of household savings, RoI, NI and all-Ireland, 2011-16
                                                                                                      • Market Segmentation

                                                                                                        • Key points
                                                                                                          • Consumers opting to keep cash close to hand
                                                                                                            • Figure 49: Type of savings account, NI and RoI, 2011
                                                                                                          • Fixed-term savings accounts ill suited to current environment
                                                                                                          • Companies and Products

                                                                                                              • Figure 50: Profiled financial institutions, 2012
                                                                                                            • AIB
                                                                                                              • An Post
                                                                                                                • Bank of Ireland
                                                                                                                  • The Co-operative Bank
                                                                                                                    • EBS Limited
                                                                                                                      • First Trust Bank
                                                                                                                        • HSBC
                                                                                                                          • National Irish Bank
                                                                                                                            • National Treasury Management Agency
                                                                                                                              • Nationwide
                                                                                                                                • Northern Bank
                                                                                                                                  • Permanent TSB
                                                                                                                                    • Post Office
                                                                                                                                      • RaboDirect
                                                                                                                                        • Santander
                                                                                                                                          • Ulster Bank
                                                                                                                                          • Consumer – Savings Account Ownership

                                                                                                                                            • Key points
                                                                                                                                              • Savings account ownership up in NI, down in RoI
                                                                                                                                                  • Figure 51: Consumers who own a savings account, NI and RoI, 2007-11
                                                                                                                                                • Multiple account ownership higher among RoI consumers
                                                                                                                                                    • Figure 52: Number of savings accounts held, NI and RoI, 2011
                                                                                                                                                    • Figure 53: Agreement with selected finance-related statements, NI and RoI, 2011
                                                                                                                                                  • Multiple ownership down in RoI, steady in NI
                                                                                                                                                      • Figure 54: Number of savings accounts owned, NI and RoI, 2007-11
                                                                                                                                                    • Multiple ownership highest among consumers aged 55-64
                                                                                                                                                      • Figure 55: Consumers who own two savings accounts, by age, NI and RoI, 2011
                                                                                                                                                    • High level of loyalty among savings account owners...
                                                                                                                                                        • Figure 56: Consumer response to: ‘How long have you held your savings account?’, RoI and NI, 2011
                                                                                                                                                        • Figure 57: Where consumers opened a new savings account, RoI and NI, 2011
                                                                                                                                                      • ...but still possible to draw in new customers
                                                                                                                                                          • Figure 58: Consumers who have had their savings account for three to five years, by age, NI and RoI, 2011
                                                                                                                                                        • Majority of consumers have their own savings account
                                                                                                                                                            • Figure 59: Own or joint savings account, NI and RoI, 2011
                                                                                                                                                          • Majority make own decision on savings account selection
                                                                                                                                                              • Figure 60: Consumer response to: 'Who chose your bank for savings account?', NI and RoI, 2011
                                                                                                                                                              • Figure 61: Consumers who chose their own account, by age, NI and RoI, 2011
                                                                                                                                                          • Consumer – Choosing a Savings Account

                                                                                                                                                            • Key points
                                                                                                                                                              • Interest rates the key factor when choosing a savings account provider
                                                                                                                                                                  • Figure 62: Most important factors when choosing a bank/building society for a savings account, NI and RoI, 2011
                                                                                                                                                                • Increased focus on interest rates since economic downturn
                                                                                                                                                                    • Figure 63: Consumers who regard 'interest rates' as the most important factor when choosing a bank/building society with which to open a savings account, NI and RoI, 2007-11
                                                                                                                                                                  • NI consumers less focused on interest rates
                                                                                                                                                                    • ABC1s and 35-44s most focused on interest rates
                                                                                                                                                                        • Figure 64: Consumers who regard 'interest rates' as the most important factor when choosing a savings account provider, by gender, age and socio-economic background, NI and RoI, 2011
                                                                                                                                                                      • Increased importance attached to company reputation
                                                                                                                                                                          • Figure 65: Consumers who regard ‘company reputation’ to be the most important factor when choosing a savings account provider, NI and RoI, 2007-11
                                                                                                                                                                        • Locality and personal service of less importance for savings accounts
                                                                                                                                                                            • Figure 66: Consumers who regard ‘locality’ as the most important factor when choosing a savings account and a current account provider, NI and RoI, 2011
                                                                                                                                                                          • Online facilities more important for current than savings accounts
                                                                                                                                                                              • Figure 67: Consumers who regard online presence as the most important factor when choosing a savings account and a current account provider, NI and RoI, 2011
                                                                                                                                                                          • Consumer – Savings Account Activity

                                                                                                                                                                            • Key points
                                                                                                                                                                              • A third of RoI consumers add to savings each month
                                                                                                                                                                                • Figure 68: Frequency of paying into savings account, RoI and NI, 2011
                                                                                                                                                                              • Downturn hitting RoI consumers' capacity to save regularly
                                                                                                                                                                                  • Figure 69: Consumers who pay into their savings account every month, NI and RoI, 2009 and 2011
                                                                                                                                                                                • ABC1s and 35-44s most likely to save on monthly basis
                                                                                                                                                                                • Appendix

                                                                                                                                                                                  • NI data
                                                                                                                                                                                    • Figure 70: Number of savings accounts held, by demographics, NI, 2011
                                                                                                                                                                                    • Figure 71: Own/joint savings account, by demographics, NI, 2011
                                                                                                                                                                                    • Figure 72: Type of savings account held, by demographics, NI, 2011
                                                                                                                                                                                    • Figure 73: Frequency of paying into savings account, by demographics, NI, 2011
                                                                                                                                                                                    • Figure 74: Savings account with branch, by demographics, NI, 2011
                                                                                                                                                                                    • Figure 75: How long savings account(s) held, by demographics, NI, 2011
                                                                                                                                                                                    • Figure 76: Who chose bank for savings account, by demographics, NI, 2011
                                                                                                                                                                                    • Figure 77: Consumer response to: ‘Where did you open a new savings account?’, by demographics, NI, 2011
                                                                                                                                                                                    • Figure 78: Bank/building society choice (savings account): most important factor, by demographics, NI, 2011
                                                                                                                                                                                    • Figure 79: Bank/building society choice (savings account): most important factor cont'd, by demographics, NI, 2011
                                                                                                                                                                                    • Figure 80: Bank/building society choice (savings account): second most important factor, by demographics, NI, 2011
                                                                                                                                                                                    • Figure 81: Bank/building society choice (savings account): second most important factor cont'd, by demographics, NI, 2011
                                                                                                                                                                                  • RoI data
                                                                                                                                                                                    • Figure 82: Number of savings accounts held, by demographics, RoI, 2011
                                                                                                                                                                                    • Figure 83: Own/joint savings account, by demographics, RoI, 2011
                                                                                                                                                                                    • Figure 84: Type of savings account held, by demographics, RoI, 2011
                                                                                                                                                                                    • Figure 85: Frequency of paying into savings account, by demographics, RoI, 2011
                                                                                                                                                                                    • Figure 86: Savings account with branch, by demographics, RoI, 2011
                                                                                                                                                                                    • Figure 87: Consumer response to: ‘How long have you held your savings account?’, by demographics, RoI, 2011
                                                                                                                                                                                    • Figure 88: Consumer response to: ‘Who chose your bank for savings account?’, by demographics, RoI, 2011
                                                                                                                                                                                    • Figure 89: Consumer response to: ‘With whom did you open a new savings account?’, by demographics, RoI, 2011
                                                                                                                                                                                    • Figure 90: Bank/building society choice (savings account): most important factor, by demographics, RoI, 2011
                                                                                                                                                                                    • Figure 91: Bank/building society choice (savings account): most important factor cont'd, by demographics, RoI, 2011
                                                                                                                                                                                    • Figure 92: Bank/building society choice (savings account): most important factor cont'd, by demographics, RoI, 2011
                                                                                                                                                                                    • Figure 93: Bank/building society choice (savings account): second most important factor, by demographics, RoI, 2011
                                                                                                                                                                                    • Figure 94: Bank/building society choice (savings account): second most important factor cont'd, by Demographics, RoI, 2011
                                                                                                                                                                                    • Figure 95: Bank/building society choice (savings account): second most important factor cont'd, by Demographics, RoI, 2011

                                                                                                                                                                                Companies Covered

                                                                                                                                                                                To learn more about the companies covered in this report please contact us.

                                                                                                                                                                                Savings - Ireland - February 2012

                                                                                                                                                                                £1,095.00 (Excl.Tax)