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Consumers, Saving and Investing - UK - January 2015

“Once consumers start saving, the benefits of having money set aside become more tangible. This increases their commitment to saving, and makes the habit self-perpetuating. The challenge for providers, therefore, is to find a way of encouraging consumers to take the first step.”
– Jessica Morley, Financial Services Analyst

This report looks at the following areas:

  • Cultivating the long-term savings habit
  • Low interest rates matter, but there are other influencers
  • The disconnect between enthusiasm for investing and appetite for risk

There has been much discussion about the so-called ‘hostile savings environment’. Interest rates remain at historic low levels and are not expected to rise until the latter part of 2015 and, even though economic growth has continued apace throughout 2014 and low inflation has allowed wage growth to edge incrementally ahead, the rate of growth remains slow and the squeeze on consumer finances continues to have an impact. Thus whilst the economy may be improving, the amount that consumers have to save has not necessarily grown.

In addition to these large-scale economic factors, consumer confidence is also having an impact on consumer savings patterns. Although consumers’ confidence in their financial situations dipped towards the end of 2014, it still remains high compared to the levels seen in the immediate aftermath of the recession. This inflated level of confidence has decreased consumers’ desire to save for precautionary purposes.

The need to increase savings, though, is highlighted by Mintel’s research, which shows that people are much less confident about their long-term financial wellbeing. Many worry about the amount of money that have set aside, how well they would be able to survive any financial shock, and how well prepared they are for retirement. Currently, though, they are sidelining these concerns, and instead focussing on immediate consumption.

This report provides a consumer-focused analysis of these and other inter-related factors affecting the retail saving and investing market. The initial sections of the report focus on the general economy and provide context for Mintel’s exclusively commissioned consumer research which informs the bulk of the report. The research provides analysis on consumers’ investable assets and portfolio composition as well as additional analysis on the attitudes of consumers with regards to saving and investing, and their reasons for engaging in these activities.


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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • Economic background
            • Strong economic growth throughout 2014
              • Low levels of unemployment but slow wage growth
                • Saving and investing environment
                  • Interest rates remain at historic low levels
                    • Figure 1: Rate of change for consumer deposits, January 2008-October 2014
                  • 2014 FTSE 100 close did not match that of 2013
                    • Below target inflation easing pressure on consumers
                      • Consumer confidence
                        • Consumer confidence falls after post-recession high
                          • Figure 2: Financial confidence index, 2009-14
                        • Higher earners are also feeling the squeeze
                          • Major concerns about consumers’ long-term financial security
                            • Figure 3: Consumer confidence in their future financial wellbeing, October 2014
                          • The consumer
                            • Value of savings and investments
                              • Figure 4: Value of savings and investments, October 2014 and November 2013
                            • Saving and investment portfolio
                              • Figure 5: Saving and investment product ownership, November 2013
                            • Most people are saving for precautionary reasons
                              • Figure 6: Reasons for saving, October 2014
                            • Some say that they cannot afford to save at the moment
                              • Figure 7: Attitudes towards saving and investing, October 2014
                            • Attitudes towards savings products and providers
                              • Figure 8: Attitudes towards savings products and providers
                            • Some 65% feel that they “cannot afford to take risks with my savings”
                              • Figure 9: Attitudes towards investing, October 2014
                            • What we think
                            • Issues and Insights

                                • Cultivating the long-term savings habit
                                  • The facts
                                    • The implications
                                      • Low interest rates matter, but there are other influencers
                                        • The facts
                                          • The implications
                                            • The disconnect between enthusiasm for investing and appetite for risk
                                              • The facts
                                                • The implications
                                                • Trend Application

                                                  • Without a care
                                                    • Guiding Choice
                                                      • Mintel Futures: Old Gold
                                                      • Economic Background

                                                        • Key points
                                                          • Economic growth continues apace
                                                            • Figure 10: UK quarterly changes in GDP, Q1 2006-Q3 2014
                                                            • Figure 11: Quarterly values of GDP (£bn), Q1 2004-Q3 2014
                                                          • The savings ratio has fallen as the recovery has gathered pace
                                                            • Figure 12: Quarterly variations in savings ratio, Q1 2004-Q2 2014
                                                            • Figure 13: 12 month percentage change for house prices, October 2004-October 2014
                                                          • Unemployment falls to lowest level in six years
                                                            • Figure 14: Average unemployment rate, 2004-2014
                                                        • Saving and Investing Environment

                                                          • Key points
                                                            • Savers continue to lose out to low interest rates
                                                              • Figure 15: Effective household interest rates for various savings products, January 2011-October 2014
                                                            • Falling energy prices putting pressure on the FTSE 100
                                                              • Below target inflation limits the scope for the BoE to raise rates
                                                                • Figure 16: Consumer Price Index values, 12 month inflation rates, January 2007-October 2014
                                                            • Retail Savings and Investment Overview

                                                              • Key points
                                                                • Slow growth in retail savings balances
                                                                  • Figure 17: Rate of change for consumer deposits and consumer personal loans and overdrafts, January 2008-October 2014
                                                                • Growth in ISA subscriptions predominantly driven by stocks and shares
                                                                    • Figure 18: Volume and value of ISA subscriptions, by type of ISA, 2009/09-2013/14
                                                                  • Net and gross investment fund sales
                                                                    • Figure 19: Retail sales of unit trusts and OEICs – UK domiciled, 2008-13
                                                                • Consumer Confidence

                                                                  • Key points
                                                                    • Decrease in confidence in short-term financial wellbeing
                                                                      • Figure 20: Financial confidence index, 2009-14
                                                                      • Figure 21: Consumer sentiment about financial situation for next 12 months, December 2013 vs December 2014
                                                                      • Figure 22: Financial situation compared to 12 months ago, December 2013 vs. December 2014
                                                                    • Considerable difference in outlook for high earners
                                                                      • Figure 23: Consumer sentiment about financial situation for next 12 months, by annual income, December 2014
                                                                      • Figure 24: Proportion of consumers confident that they will be OK over the next 12 months, by income, March 2014-December 2014
                                                                    • Only 6% feel “very secure” about their long-term financial security
                                                                      • Figure 25: Consumers’ confidence in their future financial well-being
                                                                    • The cost of retirement weighs heavily on people’s long-term sense of security
                                                                        • Figure 26: Confidence in future financial wellbeing by gross annual household income, October 2014
                                                                    • Value of Savings and Investments

                                                                      • Key points
                                                                        • Saving is a widespread practice
                                                                          • Figure 27: Value of savings and investments, October 2014
                                                                        • Slight increase in value of savings
                                                                          • Figure 28: Values of saving and Investment, November 2013 and October 2014
                                                                        • Some 22% of higher earners have at least £100,000 in savings and investments
                                                                          • Figure 29: Value of savings by household income, October 2014
                                                                      • Type of Saving and Investment Products Owned

                                                                        • Key points
                                                                          • Simplicity rules
                                                                            • Figure 30: Penetration of savings and investments products, October 2014
                                                                          • The investment opportunity
                                                                            • Peer-to-peer lending, or peer-to-peer guidance?
                                                                              • Older consumers with greater amounts of savings are more likely to invest
                                                                                • Figure 31: Age profile of savers and investors, October 2014
                                                                              • Consumers are ill-prepared for the long-term future
                                                                              • Motivation for Saving

                                                                                • Key points
                                                                                  • Protection from the unexpected is the main motivation for saving
                                                                                    • Figure 32: Consumer motivations for saving, October 2014
                                                                                  • Reliance on the state
                                                                                    • Retirement is a process, not an event
                                                                                      • “Long-term” planning only covers one generation
                                                                                        • Shifting priorities
                                                                                          • Half of under-25s are saving for education costs
                                                                                            • Figure 33: Reasons to save by age, October 2014
                                                                                          • Motivation matters
                                                                                          • Long-term Financial Confidence

                                                                                            • Key points
                                                                                              • Changing responsibilities lead to changes in confidence
                                                                                                • Figure 34: Consumer assessment of future financial well-being by age, October 2014
                                                                                              • The influence of product ownership on confidence
                                                                                                • Figure 35: Consumers’ rating of long-term financial security by ownership of savings and investment products, October 2014
                                                                                                • Figure 36: Ownership of equity type investment products by confidence in future financial wellbeing, October 2014
                                                                                              • The property wealth effect
                                                                                                • The influence of value of savings and investments on confidence
                                                                                                  • Figure 37: Consumer assessment of future financial well-being by value of savings, October 2014
                                                                                                • Planning for retirement
                                                                                                  • Figure 38: Ownership of savings and investment products by age, October 2014
                                                                                              • Attitude towards saving and investing

                                                                                                • Key points
                                                                                                  • Saving for peace of mind
                                                                                                    • Figure 39: Consumer attitude towards saving, October 2014
                                                                                                  • Affordability is the biggest barrier to saving
                                                                                                    • Saving is more ad-hoc than habitual for many consumers
                                                                                                        • Figure 40: Attitude towards savings and investing by trends in adding to savings and spending extra money, October 2014
                                                                                                        • Figure 41: Attitude towards saving and investing by current financial situation and confidence in financial situation over the next 12 months, October 2014
                                                                                                      • Variations in savings habits highlight the need for specifically targeted products
                                                                                                        • Figure 42: Attitude towards saving by gender and age, October 2014
                                                                                                      • The vital role of the housing market
                                                                                                        • Figure 43: Attitude towards saving and investing by current housing situation, October 2014
                                                                                                    • Attitudes towards Savings Products and Providers

                                                                                                      • Key points
                                                                                                        • For many consumers, instant access is essential
                                                                                                          • Figure 44: Consumer attitude towards saving products and providers
                                                                                                        • Consumers split over interest rates
                                                                                                          • Too many complicated products prevent consumers from getting the best deal
                                                                                                            • Figure 45: Attitudes towards saving, by agreement with other attitudinal statements about saving, October 2014
                                                                                                            • Figure 46: Agreement with various statements about savings by value of savings/investments, October 2014
                                                                                                          • The role of the web
                                                                                                            • Figure 47: Agreement/disagreement with the statement “purchasing savings products is complicated” by age, October 2014
                                                                                                        • Consumers and Investing

                                                                                                          • Key points
                                                                                                            • Overwhelming majority of consumers believe investments should be made easier
                                                                                                              • Figure 48: Consumers attitude towards investing, October 2014
                                                                                                              • Figure 49: Agreement with the statement “Making investments should be made easier” by annual household income and use of extra money, October 2014
                                                                                                            • Investing is not perceived to be worth the risk
                                                                                                              • The mental scars of the financial crisis are still evident
                                                                                                                • Confident investors make for confident consumers
                                                                                                                    • Figure 50: Security in future financial wellbeing, by agreement with attitudes towards investing, October 2014
                                                                                                                  • Lack of alignment between interest in investment and appetite for risk
                                                                                                                      • Figure 51: Agreement with various statements about investments by age, October 2014
                                                                                                                  • Women, Saving and Investing

                                                                                                                    • Key points
                                                                                                                      • Women are less likely to have savings and/or investments and for these to be of a high value
                                                                                                                        • Figure 52: Value of savings/investments by gender, October 2014
                                                                                                                        • Figure 53: Key financial indicators by gender, October 2014
                                                                                                                      • Savings and investment products perceived to be too complex among women
                                                                                                                          • Figure 54: Ownership profile of savings and investment products, by gender October 2014
                                                                                                                          • Figure 55: Agreement with various attitudes about investment by Gender, October 2014
                                                                                                                        • More reason to link life goals to saving and investment
                                                                                                                          • The need for a confidence boost
                                                                                                                            • Figure 56: Attitude towards saving and investing by gender, October 2014

                                                                                                                        Consumers, Saving and Investing - UK - January 2015

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