Deposit and Savings Accounts - UK - June 2017
“Savers are having a grim time, with an ultra-low base rate and rising inflation making it near-impossible to achieve a real return. The introduction of funding schemes by the Bank of England has also reduced banks’ reliance on retail deposits, removing the pressure to aggressively compete. Many savers, therefore, are turning to alternative products, such as high interest current accounts and peer-to-peer lending, in pursuit of better yields.”
– Sarah Hitchcock, Senior Finance Analyst
This report examines the following:
- Older savers respond very differently to low interest rates than younger savers
- Beware of overlooking the importance of branches in the drive towards digital
What you get
What's included
- Consumer Attitudes and Behaviour
- Market data
- Competitive analysis
- Risks and Opportunities
- What’s Next
- Market Trends
This market report provides in-depth analysis and insight supported by a range of data. At the same time, introductory and top-level content is provided to give you an overview of the issues covered.
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Market
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Consumer
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Brand/Company
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Data
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* This is a sample representation of the report layout and does not reflect the research included in this report.
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Table of contents
Overview
- What you need to know
- Products covered in this report
- Household retail savings balances
- What you need to know
Executive Summary
- The market
- Slower growth in household balances forecast
- Figure 1: Forecast of retail savings balances, at current prices – Fan chart, 2012-22
- Time deposit balances fell 4% in 2016, while all other product sectors grew
- Savers struggle to achieve a real return with low interest rates and rising inflation
- Government introduces new ISA products and consults on Help to Save Scheme
- Companies and brands
- Major banking groups and NS&I are the largest providers of retail savings products
- Individual-brand market positions vary across main product types
- Figure 2: Company hold savings product with, by selected product type, April 2017
- Providers tweak existing products…
- …and invest in new digital platforms
- The consumer
- More than three quarters of UK adults own a deposit or savings account
- Figure 3: Ownership of cash savings products, April 2017
- Online and digital dominate channel preference for most account activities
- Figure 4: Preferred channel per activity, April 2017
- Many savers are turning to high interest current accounts to boost their returns…
- Figure 5: Ownership of competitor products, April 2017
- …and are showing growing interest in equity and crowd-lending investment
- Figure 6: Impact of low interest rate on motivation to save and product/asset choice, April 2017
- Digital revolution paves the way for new micro-saving apps
- Figure 7: Usage of or interest in digital apps/tools that help track spending, aggregate online accounts and achieve savings goals, April 2017
- Good level of interest in intelligent automatic saving tools
- Figure 8: Usage of or interest in intelligent automatic saving tools/apps, April 2017
- What we think
Issues and Insights
- Older savers respond very differently to low interest rates than younger savers
- The facts
- The implications
- Beware of overlooking the importance of branches in the drive towards digital
- The facts
- The implications
- Older savers respond very differently to low interest rates than younger savers
The Market – What You Need to Know
- Growth in household savings predicted to slow
- Time deposit balances down 4% in 2016
- Digital is the way forward
- Tough climate for savers
- Government offers new incentives
- Growth in household savings predicted to slow
Market Size and Forecast
- In real terms, household savings balances grew by 4.3% in 2016…
- Figure 9: Household retail savings balances (non-seasonally adjusted), 2007-16
- …but 2017 could see a fall in the value of retail savings
- Figure 10: Household retail savings balances (non-seasonally adjusted), at current and constant prices, 2007-17
- Slower growth forecast
- Figure 11: Forecast of retail savings balances, at current prices – Fan chart, 2012-22
- Figure 12: Forecast of total retail savings balances, at current and constant prices, 2017-22
- Forecast methodology
- In real terms, household savings balances grew by 4.3% in 2016…
Market Segmentation
- Interest-bearing sight accounts attract the largest proportion of retail balances
- Figure 13: Household retail savings balances, by main product type, 2012-16
- Interest-bearing sight accounts attract the largest proportion of retail balances
Channels to Market
- Online is the preferred channel to manage a saving account…
- Figure 14: Preferred channel per activity, April 2017
- …but many still prefer to open an account in person
- Online is the preferred channel to manage a saving account…
Market Drivers
- Savers hit by double whammy of low interest rates and rising inflation
- Figure 15: Official bank base rate and annual percentage changes in CPI and RPI, March 2008-March 2017
- Situation for savers exacerbated by government funding schemes
- Figure 16: Effective interest rates on household deposit balances versus official bank base rate, February 2008-February 2017
- Best returns available on longer-term fixed-rate products
- Figure 17: Average monthly quoted household deposit and cash ISA interest rates, March 2011-March 2017
- Savings ratio fell sharply in 2016
- Figure 18: Gross household savings and saving ratio, seasonally adjusted and at current prices, 2006-16
- Low interest rates reduce the appeal of saving…
- …and heighten interest in alternatives
- Growth of peer-to-peer lending
- Some savers are turning to current accounts
- Savers hit by double whammy of low interest rates and rising inflation
Regulatory and Legislative Changes
- Government consults on Help to Save scheme
- Most savers no longer pay tax on their savings…
- …but has the new tax-free allowance made cash ISAs irrelevant?
- Government raises ISA allowance and introduces new products
- Banks drag their feet on launching LISAs
- A new ISA for the peer-to-peer lending market
- CMA publishes final order on open banking
- Government consults on Help to Save scheme
Companies and Brands – What You Need to Know
- Major banking groups and NS&I are the largest providers of retail savings accounts
- Individual-brand market positions vary across main product types
- The traditional retail savings sector sees limited product development…
- …but there’s significant investment in digital innovation
- Low levels of adspend
- Major banking groups and NS&I are the largest providers of retail savings accounts
Market Share
- LBG is the largest provider of savings and current accounts in the UK
- Figure 19: Providers’ total retail savings balances at year end, shown on a group basis – UK, 2014-16
- Nationwide is larger than most rivals when current account balances are stripped out
- Provider rankings vary according to product type
- Figure 20: Company hold savings product with, by product type, April 2017
- LBG is the largest provider of savings and current accounts in the UK
Competitive Strategies and Industry Innovation
- New product launches
- NS&I unveils a new three-year guaranteed growth bond
- Other recent launches
- New players
- New entrants from the motor finance sector currently offer some of the best rates on savings accounts
- More banks emerge to take on the “challenger” mantle
- Digital developments
- Proliferation of personal finance apps
- HSBC trials new microsaving app
- UK sees the arrival of first mobile bank
- Clydesdale and Yorkshire Banks launch innovative digital platform B
- New product launches
Advertising and Marketing Activity
- Low levels of above-the-line adspend
- Figure 21: Above-the-line, online display and direct mail advertising expenditure on cash savings products, by type of product, 2012/13-2016/17
- Providers invest less in TV and press advertising…
- …and spend more on digital and direct mail
- Figure 22: Share of above-the-line, online display and direct mail advertising expenditure on cash savings products, by type of media, 2012/13-2016/17
- Halifax was the highest-spending advertiser 2016/17, even after cutting its adspend by 71%
- Figure 23: Top 16 advertisers of above-the-line, online display and direct mail advertising on cash savings products, 2014/15-2016/17
- Nielsen Ad Intel coverage
- Low levels of above-the-line adspend
The Consumer – What You Need to Know
- 77% of UK adults have some form of savings account
- Many savers are using high interest current accounts to boost their returns
- There is growing interest in equity and crowd-lending investment
- Digital revolution paves the way for new micro-saving apps
- 77% of UK adults have some form of savings account
Ownership of Cash Savings Products
- The average saver has two different types of cash savings product
- Figure 24: Ownership of cash savings products, April 2017
- NS&I’s Premium Bonds continue to garner popularity
- Regular savings accounts are a popular choice for the under-35s
- 9% of 25-34-year-olds have a Help to Buy ISA
- Those with the largest savings balances show greater preference for time accounts and NS&I products
- Figure 25: Ownership of cash savings products, by value of investible assets, April 2017
- The average saver has two different types of cash savings product
Ownership of Competitor Products
- 30% believe they have a current account that pays 1% or more on in-credit balances
- Figure 26: Ownership of competitor products, April 2017
- 14% have a stocks and shares ISA
- 5% are investing in crowd-lending
- Ownership of competitor products increases with asset wealth
- Figure 27: Ownership of competitor products, by value of investible assets, April 2017
- 30% believe they have a current account that pays 1% or more on in-credit balances
Impact of Low Interest Rates on Saving Behaviour
- Low interest rates reduce motivation to save…
- Figure 28: Impact of low interest rate on motivation to save and product choices/considerations, April 2017
- …and shift the focus on to alternative assets
- 13% have moved their savings to a high interest current account
- Impact on motivation varies hugely across different age groups
- Figure 29: Impact of low interest rate on motivation to save, by age, April 2017
- Low interest rates reduce motivation to save…
Interest in Digital Saving Apps
- Finance apps currently attract low usage but high interest levels
- Figure 30: Usage of or interest in digital apps/tools that help track spending, aggregate online accounts and achieve savings goals, April 2017
- 48% are interested in using a round-up and save spare change facility
- Figure 31: Usage of or interest in intelligent automatic saving tools/apps, April 2017
- People sometimes just need a nudge
- Finance apps currently attract low usage but high interest levels
Appendix – Data Sources and Abbreviations
- Abbreviations
- Consumer research methodology
Appendix – Market Size and Forecast
- Household saving balances forecast – Best- and worst-case scenarios
- Figure 32: Forecast – Best- and worst-case scenarios, 2017-22
- Forecast methodology
- Household saving balances forecast – Best- and worst-case scenarios
Deposit and Savings Accounts - UK - June 2017