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Deposit and Savings Accounts - UK - April 2014
Introduction
 
The UK retail savings market has had a challenging time since 2008, with prevailing low interest rates and ongoing pressure on household budgets. In 2013, retail deposits grew by 3.7% to £1.23 trillion, remaining well below the growth rates seen in the years preceding the financial crisis. 

Dominated by a handful of players comprising the retail brands of the major British banking groups and the largest building society, the savings market has seen limited product innovation over the last few years. The introduction of the Funding for Lending Scheme (FLS) in July 2012 and the Current Account Switch Service (CASS) in August 2013 have shifted providers’ focus away from their savings product range and towards their current account offerings. In an effort to attract new customers, banks and building societies are competing on new product launches with higher interest rates on in-credit balances, making current accounts an undeniable rival product to deposit and savings accounts.

This report examines these trends and their implications for both providers and consumers. Drawing on a range of information sources, it provides a comprehensive overview of how the market is evolving, as well as recent provider activity and identifies where opportunities for growth may exist. It also explores consumer saving behaviour, providing insight into savers’ attitudes and intentions by analysing the results of Mintel’s independently commissioned online consumer survey. 

Report scope and product definitions
The focus of this report is on retail deposit and savings accounts for the adult market. Although reference is made to children’s savings accounts and tax-exempt cash ISAs, these products are not covered extensively here, but form the focus of two separate Mintel reports: ISAs and Saving and Investing for Children.

There are various types of deposit and savings account available to UK consumers, which typically can be managed in-branch and/or online. The main ones are as follows:

●	Easy-access (or instant-access) savings 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
●	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/fixed-rate savings account or bond – offers a fixed rate for a fixed term, usually between one and five years
●	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

In the UK the main providers of savings accounts are the high street retail banks and building societies, although others include direct- and online-only banks, investment and private banks, retailers and the Post Office.

Another major player in the retail savings environment is National Savings & Investments (NS&I). Its current product range encompasses a Direct Saver account (easy-access account, with a variable interest rate, only accessible by phone or online); an Income Bond (easy-access bond for those with at least £500 to invest, generating monthly income based on a variable interest rate); a Direct ISA (minimum deposit of £1 and variable interest rate); an Investment Account (a postal account with a minimum deposit requirement of £20); a Children’s Savings Bond and Premium Bonds (tax-exempt product that requires a minimum deposit of £100, which goes into a monthly prize draw and offers the chance of winning up to £1 million). 

Abbreviations
AER | Annual Equivalent Rate
BBA | British Bankers’ Association
BSA | Building Societies Association
CPI | Consumer Price Index
FCA | Financial Conduct Authority
FLS | Funding for Lending Scheme
FSCS | Financial Services Compensation Scheme
FTSE | Financial Times Stock Exchange
GDP | Gross Domestic Product
HMRC | Her Majesty’s Revenue and Customs
ISA | Individual Savings Account
JGFR | John Gilbert Financial Research
LBG | Lloyds Banking Group
MBBG | Major British Banking Group
NS&I | National Savings and Investments
NMR | Nielsen Media Research. For further information, please contact nmr.communication@nielsenmedia.co.uk
OEIC | Open-ended Investment Company
ONS | Office for National Statistics
RDR | Retail Distribution Review
RPI | Retail Price Index
SME | Small and Medium Enterprises
SWOT | Strengths, Weaknesses, Opportunities, Threats

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