Table of Contents
Overview
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- What you need to know
- Products covered in this report
- Household retail savings balances
Executive Summary
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- The market
- Slower growth in household balances forecast
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- 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
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- 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
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- Figure 3: Ownership of cash savings products, April 2017
- Online and digital dominate channel preference for most account activities
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- Figure 4: Preferred channel per activity, April 2017
- Many savers are turning to high interest current accounts to boost their returns…
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- Figure 5: Ownership of competitor products, April 2017
- …and are showing growing interest in equity and crowd-lending investment
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- 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
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- 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
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- Figure 8: Usage of or interest in intelligent automatic saving tools/apps, April 2017
- What we think
Issues and Insights
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- 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
The Market – What You Need to Know
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- 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
Market Size and Forecast
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- In real terms, household savings balances grew by 4.3% in 2016…
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- Figure 9: Household retail savings balances (non-seasonally adjusted), 2007-16
- …but 2017 could see a fall in the value of retail savings
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- Figure 10: Household retail savings balances (non-seasonally adjusted), at current and constant prices, 2007-17
- Slower growth forecast
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- Figure 11: Forecast of retail savings balances, at current prices – Fan chart, 2012-22
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- Figure 12: Forecast of total retail savings balances, at current and constant prices, 2017-22
- Forecast methodology
Market Segmentation
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- Interest-bearing sight accounts attract the largest proportion of retail balances
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- Figure 13: Household retail savings balances, by main product type, 2012-16
Channels to Market
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- Online is the preferred channel to manage a saving account…
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- Figure 14: Preferred channel per activity, April 2017
- …but many still prefer to open an account in person
Market Drivers
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- Savers hit by double whammy of low interest rates and rising inflation
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- 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
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- 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
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- Figure 17: Average monthly quoted household deposit and cash ISA interest rates, March 2011-March 2017
- Savings ratio fell sharply in 2016
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- 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
Regulatory and Legislative Changes
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- 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
Companies and Brands – What You Need to Know
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- 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
Market Share
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- LBG is the largest provider of savings and current accounts in the UK
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- 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
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- Figure 20: Company hold savings product with, by product type, April 2017
Competitive Strategies and Industry Innovation
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- 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
Advertising and Marketing Activity
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- Low levels of above-the-line adspend
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- 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
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- 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%
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- 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
The Consumer – What You Need to Know
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- 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
Ownership of Cash Savings Products
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- The average saver has two different types of cash savings product
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- 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
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- Figure 25: Ownership of cash savings products, by value of investible assets, April 2017
Ownership of Competitor Products
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- 30% believe they have a current account that pays 1% or more on in-credit balances
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- 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
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- Figure 27: Ownership of competitor products, by value of investible assets, April 2017
Impact of Low Interest Rates on Saving Behaviour
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- Low interest rates reduce motivation to save…
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- 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
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- Figure 29: Impact of low interest rate on motivation to save, by age, April 2017
Interest in Digital Saving Apps
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- Finance apps currently attract low usage but high interest levels
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- 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
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- Figure 31: Usage of or interest in intelligent automatic saving tools/apps, April 2017
- People sometimes just need a nudge
Appendix – Data Sources and Abbreviations
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- Abbreviations
- Consumer research methodology
Appendix – Market Size and Forecast
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- Household saving balances forecast – Best- and worst-case scenarios
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- Figure 32: Forecast – Best- and worst-case scenarios, 2017-22
- Forecast methodology
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