Mintel’s research reveals significant disenchantment among UK savers. More than two thirds are dissatisfied with the interest they are currently earning on their savings, while a substantial minority intends to invest some of their savings to potentially boost returns. Savers with the largest balances are most likely to take this course of action.

This disenchantment with low interest rates comes at a time when household savings are at record levels. As a result of COVID-related restrictions and increased economic uncertainty, consumption contracted sharply in 2020. At the same time, retail deposits increased strongly. Much of the extra accumulated savings flowed into current accounts and has stayed there, as consumers have had little incentive to move their money.

Low interest rates are set to remain a feature over the next few years, and this is arguably the biggest threat to the market. Over the past year, savings account providers have benefited from increased customer apathy. However, this is set to change within the next year or two. As the economic recovery picks up pace and as inflation begins to rise, more savers will be prompted to switch products/providers or consider alternative homes for their money.

Providers, therefore, need to shift the narrative. Rather than focus promotion on the headline rate, greater attention needs to be given to other product features and benefits. There is already movement in this direction, with several providers introducing prize draws to attract new customers and/or reward loyalty. Most providers are also focused on improving their digital services, enabling them to offer greater customer access, control and functionality. Indeed, the biggest opportunity for the market going forward is digital saving and account aggregation.

• The impact of COVID-19 on the retail savings market.

• The proportion of adults who have savings and how much they have.

• Where people hold their savings, eg in which products and with which providers.

• Intentions to save and switch to other products/providers/asset classes over the coming year.

• Consumer usage of, and interest in, digital savings apps.

The first COVID-19 cases were confirmed in the UK at the end of January 2020, with a small number of cases in February. Rapidly rising case numbers led to the first national lockdown, starting on 23 March. It was not until 15 June that non-essential stores were allowed to reopen, followed by pubs, restaurants, hotels and hairdressers on 4 July and many beauty businesses on 13 July.

By September, it had become clear that the UK was at the start of a second wave, and social distancing measures were intensified. Continued increases in infection numbers led to Wales implementing a two-week national lockdown from 19 October, England announcing a month-long lockdown from 5 November and Scotland introducing a new five-level system of coronavirus restrictions. However, despite these restrictions, case numbers continued to increase. All four UK nations tightened restrictions in January 2021, effectively leading to a third full UK-wide lockdown.

On 22 February, Boris Johnson announced the roadmap to an easing of restrictions in England, starting with the reopening of schools on 8 March, followed by easing of restrictions on outdoor gatherings on 29 March, and with a hoped end to all restrictions by 21 June. The Welsh and Scottish governments also gave more details on their plans to ease restrictions, with both nations taking a slightly more cautious approach to the one planned for England. In England, there will be a four-step approach comprising:

• Step one, on 8 March, schools will reopen, and two people allowed to meet outdoors socially and from 29 March, outdoor gatherings of either six people or two households will be allowed and outdoor sports can resume

• Step two sees shops, hairdressers, gyms, zoos and theme parks reopen from 12 April and outdoor hospitality resume

• Step three is planned to start from 17 May, with most social contact rules lifted, as well as limited mixing indoors

• Step four, it is hoped that, from 21 June, all legal limits on social contact will end

The UK’s vaccination programme started on 8 December 2020, and with the Pfizer-BioNTech, Moderna and Oxford-AstraZeneca vaccines licenced for use in the UK, the government aims to offer a first dose of the vaccine to 32 million people by mid-April and for all adults will have had their first jab by the end of July 2021. While concerns remain over the efficacy of existing vaccines to new strains of the virus and the disparity in vaccine availability across the globe, there are, at least within these shores, finally some reasons for optimism.

Mintel’s economic assumptions are based on the Office for Budget Responsibility’s central scenario included in its March 2021 Economic and Fiscal Outlook Report. After the fall of 9.9% over the course of 2020, the scenario suggests that UK GDP will grow by 4% in 2021 and 7.3% in 2022.

GDP is not expected to return to pre-COVID-19 levels until the second quarter of 2022, although this is six months earlier than the OBR forecast in November 2020, mainly because of the faster than expected rollout of vaccines.

Unemployment is expected to peak at 6.5% in the fourth quarter of 2021. As with GDP, this is more positive than the OBR’s November forecast, but the OBR does raise the prospect of long-term scarring on employment, especially in the more exposed retail and hospitality sectors.

The focus of this Report is retail deposit and savings accounts for the adult market. Children’s savings products are not covered here and are the subject of a separate Report (see Children’s Savings Products – UK, March 2020).

Product definitions are as follows:

Deposit and savings accounts are interest-bearing accounts provided by banks, building societies and other financial providers. There are various types, of which the main ones are:

• instant or easy access account – the most widely available and commonly held, this type of account does not impose any restrictions on making withdrawals and provides either a variable interest rate or a fixed/guaranteed interest rate for an introductory period

• limited access account – the account holder can make a certain number of withdrawals in a given period (eg three per year) without loss of interest

• notice account – this is where the account holder must give a certain number of days’ notice before making a withdrawal so as not to lose any interest

• fixed term account or bond – offers a fixed rate for a fixed term, usually between one and five years (may also be referred to as fixed rate or fixed interest account)

• regular savings account – where the account holder is required to make regular monthly payments (usually ranging from £25 to £250 or £500 a month) in return for a higher interest rate

Cash ISAs are tax-exempt individual savings accounts, meaning no tax is paid on any interest earned. They are available to UK residents aged 16+. In the 2021/22 tax year, up to £20,000 can be deposited in a cash ISA each tax year. As with ordinary savings accounts, there are different varieties (eg fixed term and instant access).

National Savings & Investments (NS&I) provide a range of tax-free cash savings products, backed by HM Treasury, the most popular of which are Premium Bonds.

Also covered in Mintel’s consumer survey, but not included in the market size data (deposit balances):

Offshore savings accounts are accounts set up and run by a bank, or a bank’s subsidiary, based outside of the UK, usually in the Channel Islands, the Isle of Man or Ireland. Offshore accounts can offer certain tax benefits and multi-currency options but are not covered by the UK’s Financial Services Compensation Scheme.

For the Market Size and Forecast section, Mintel uses data collated by the Bank of England on household deposits.

Household deposit balances refer to the outstanding amounts held in deposit and savings accounts within the retail household sector. Mintel’s market size and forecast of household deposits cover cash held at banks, building societies and other financial institutions but excludes sterling ‘notes and coins’ held in circulation outside the Bank of England.

Total household deposits comprise the following:

Sight deposits – comprises credit balances on customers’ accounts where the entire balance is accessible without penalty, either on demand or by close of business on the day following that on which the deposit was made. There are two main sub-categories:

• Interest-bearing sight deposits – where interest is payable; this segment refers to instant access savings accounts and interest-bearing current accounts.

• Non-interest-bearing deposits – where interest is not payable; this segment predominantly refers to non-interest-bearing current accounts.

Time deposits – refer to deposits where part of the balance is not accessible without penalty, either on demand or by close of business on the day after the deposit was made, and where interest is payable; this segment comprises notice accounts, fixed-rate bonds and most regular savings accounts.

Cash ISAs – are classified as ‘time’ deposits, consistent with their balance sheet treatment due to the tax implications of withdrawing. Therefore, cash ISAs that allow immediate access to capital are also classified as time deposits, despite instant access to the balance. However, cash ISA balances are shown separately in the segmental data.

NS&I deposits – as per the definition above.