Product and pricing trends in UK deposits and ISAs
Datamonitor
February 24, 2009 129 Pages - SKU: DFMN2150929
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Countries covered: United Kingdom
Introduction
This report specifically analyses the retail deposits and ISA market in the following segments: ordinary savings accounts, regular savings accounts, Mini cash ISAs, current accounts, and foreign currency accounts.
Scope- Covers the UK retail deposits market, including forecasts to 2012 for ISAs and to 2013 for deposits
- Analyzes Ordinary savings accounts, Regular savings accounts, ISAs, Current accounts with / without overdrafts and Foreign currency accounts
- Assesses interest rates, product features, market size and share
- Includes January 2007, January 2008 and December 2008 Moneyfacts data
Highlights
Cash ISAs continue to grow. While sales of stocks and shares ISAs are set to decrease over the coming period, cash ISAs are increasing their overall share of the retail deposits market. There has been a sharp reversal of previous trends, as providers move to offer shorter notice accounts.
Foreign currency accounts have slightly lost market share by number of accounts offered, and the failure of Kaupthing has had a negative impact on the offshore euro and dollar markets, as before its collapse it provided one of the best interest rates available.
By December 2008, banks' non-tiered offerings outnumbered tiered accounts, while building societies still provided a combined total of 295 tiered accounts to 194 non-tiered. This may suggest that banks are able to respond more rapidly than building societies to market conditions and consumer sentiment.
Reasons to Purchase- Develop a comprehensive understanding of product features and pricing strategies in the retail deposit sector
- Understand the future for the UK deposits and ISAs market, including the effect of the current economic downturn
- Benchmark your bank against the market in terms of product range and pricing features
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- Overview
- Catalyst
- Summary
- Methodology
- Executive Summary
- Investors' decline in confidence has had important effects on each of the retail deposit market segments
- Table of Contents
- Table of figures
- Table of tables
- Chapter 1 Introduction
- What is this report about?
- Who is the target reader?
- How to use this report
- Chapter 2 Market Context
- Introduction
- The deposits market has grown more than twice as fast as the total S&I market
- Net deposit inflows continue their rise, as do mass equity outflows
- Datamonitor anticipates consistent growth in the deposits market
- The ISA market continued to grow in 2007
- Total ISA sales continued their slow but sustained growth
- Mini ISAs dominate the ISA market and are comprised mostly of cash ISAs
- Maxi ISAs will feel the economic downturn in one to two years
- New ISA subscriptions are driven by mini cash and stocks and shares ISAs
- Stocks and shares ISAs still lead the rise in the average value of new ISA subscriptions
- The market correction will take at least two years to recover from
- Tables
- CHAPTER 3 PRODUCT TRENDS and segments IN UK DEPOSITS AND ISAS
- Introduction
- Balancing safety against returns is now top priority
- The failure of Icesave fundamentally changed savers' motivations
- Nationalized banks can afford to offer lower rates as they are considered safer
- Foreign entrants offer better returns
- Customers are keen not to tie their money up
- Returns are falling drastically as the Bank of England's base interest rate is the lowest ever
- Many of the best returns are offered for an initial period in order to attract customers
- Product SEGMENTS
- Introduction
- Key findings
- Ordinary savings
- Ordinary savings accounts are on the increase once again
- Non-tiered accounts soared within 12 months, halving the gap between tiered and non-tiered offerings to just 12%
- Notice periods decreased further as customers fear being too tied down
- Banks and building societies differ slightly in their distribution methods, but both favor branch-only
- Interest paid on ordinary savings accounts tumbled due to the credit crunch
- Cash ISAs
- The growth of the cash ISA continues
- The emphatic move away from longer notice accounts was a reversal of previous trends
- Providers' concerns over the economy mean less fixed rate accounts
- As interest rates tumbled across the board, ISA rates suffered
- Distribution networks are similar for both banks and building societies, but banks have greater internet provision
- Top competitors continue to tie their products together to increase their share of customers' wallets
- Banks continue to offer better rates than building societies on cash ISAs, but the gap is slight
- Regular savings accounts
- Regular savings accounts declined by 4.8% in 2008
- Building societies rid themselves of fixed rate regular savings accounts
- There was a slight shift towards shorter notice periods for regular savings accounts in 2008
- While regular savings interest rates have fallen, they still offer the best returns
- Current accounts
- Current account provision remains consistent throughout 2008
- Interest rates have fallen slightly in current accounts despite being far below the base rate already
- No interest current accounts are becoming more common, a trend that is set to continue
- Offsetting or pooling has become far less popular
- Building societies continue to embrace funding requirements over account fees
- Current accounts without overdrafts still comprise an extremely small portion of the overall sector
- Distribution of current accounts is geared towards ease of access
- Foreign currency accounts
- The number of foreign currency accounts fell over 2008
- Most onshore euro current accounts continue to offer no interest rates
- The failure of Kaupthing has had a negative impact on the offshore euro and dollar markets
- The onshore euro accounts market sees a surprise new entrant
- Ordinary savings accounts
- Cash ISAs
- Regular Savings Accounts
- Current accounts
- Foreign currency accounts
- APPENDIX
- Definitions
- Average interest rate
- Base rate/discount rate
- Deposits
- Investment trusts
- ISAs and mini cash ISAs
- OEICs
- Unit trusts
- Methodology
- Further reading
- Ask the analyst
- Datamonitor consulting
- Disclaimer
- List of Tables
- Table 1: Overview of the retail savings and investments market, 2004-08e
- Table 2: Total net inflows in UK retail savings and investments by broad product line, 2003-07
- Table 3: Overview of the retail savings and investments market, 2009f-2013f
- Table 4: Total gross ISA sales segmented by type
- Table 5: Gross mini ISA sales segmented by type
- Table 6: Gross maxi ISA sales segmented by type
- Table 7: Number of ISA accounts subscribed in current year segmented by type
- Table 8: Average subscriptions per account
- Table 9: Forecast annual ISA balances by stocks and shares and cash, 2008-12
- Table 10: Market segmentation, number of accounts, January and December 2008
- Table 11: Ordinary savings accounts by tiered or non-tiered, market share by number of accounts, January and December 2008
- Table 12: Tiered and non-tiered accounts offered by banks and building societies, number of accounts, January and December 2008
- Table 13: Ordinary savings accounts by notice period, market share by number of accounts, 1999-December 2008
- Table 14: Number of ordinary savings accounts by notice period split by institution, number of accounts January and December 2008
- Table 15: Distribution method for ordinary savings accounts provided by building societies, number of accounts, January and December 2008
- Table 16: Distribution method for ordinary savings accounts provided by banks, number of accounts, January and December 2008
- Table 17: Average interest rates on ordinary savings accounts, % gross, January 2007, January 2008 and December 2008
- Table 18: Average interest rates offered on ordinary savings accounts split by institution, % gross, January and December 2008
- Table 19: Cash ISA accounts by notice period, number of accounts, January and December 2008
- Table 20: Fixed and variable rate cash ISA accounts split by institution, number of accounts, January and December 2008
- Table 21: Average interest rate on cash ISAs, % gross, January and December 2008
- Table 22: Distribution method for cash ISAs provided by building societies, number of accounts, January and December 2008
- Table 23: Distribution method for cash ISAs provided by banks, number of accounts, January and December 2008
- Table 24: Average interest rates offered on ordinary savings accounts split by institution, % gross, January and December 2008
- Table 25: Fixed and variable rate regular savings accounts split by institution, number of accounts, January and December 2008
- Table 26: Notice periods for variable rate regular savings accounts, number of accounts, January and December 2008
- Table 27: Average interest rates for regular savings accounts, % gross, January and December 2008
- Table 28: Average interest rates for current accounts, % gross, January and December 2008
- Table 29: Average interest rates for current accounts split by institution, % gross, January and December 2008
- Table 30: Distribution patterns in the current account market, number of accounts, January and December 2008
- Table 31: Segments of the foreign currency market, number of accounts, January and December 2008
- Table 32: Interest rates for offshore dollar and euro accounts, % gross, January and December 2008
- Table 33: Notice periods for offshore dollar and euro accounts, number of accounts, January and December 2008
- List of Figures
- Figure 1: Overview of the retail savings and investments market, 2004-08e
- Figure 2: Total net inflows in UK retail savings and investments by broad product line, 2003-07
- Figure 3: The deposits market is forecast to continue to grow over the next five years
- Figure 4: Total gross ISA sales segmented by type
- Figure 5: Table 4: Gross mini ISA sales segmented by type
- Figure 6: Table 5: Gross maxi ISA sales segmented by type
- Figure 7: Table 6: Number of ISA accounts subscribed in current year segmented by type
- Figure 8: Table 7: Average subscriptions per account
- Figure 9: Table 8: Forecast annual ISA balances by stocks and shares and cash, 2008-12
- Figure 10: The market shifted back towards ordinary savings accounts between January and December 2008 (measured by number of accounts)
- Figure 11: Non-tiered accounts increased in popularity, 2008
- Figure 12: Banks' non-tiered accounts outnumbered tiered accounts by December 2008
- Figure 13: Longer notice periods continue to become less common, extending this trend to nine years
- Figure 14: Instant and no-notice accounts increased for banks and building societies alike
- Figure 15: Banks have seen a large increase in branch-only, and it remains the method of choice for building societies
- Figure 16: Average interest rates on ordinary savings accounts fall to a level below January 2007
- Figure 17: Banks and building societies interest rates both plummet
- Figure 18: There has been a large shift towards shorter notice accounts
- Figure 19: Fixed rate accounts fell due to fears over the economy
- Figure 20: Average interest rates, ISAs
- Figure 21: Both building societies and banks favor branch-only, but banks provide more online services
- Figure 22: ISA interest rates banks vs. building societies
- Figure 23: Building societies reduced their fixed rate account provision
- Figure 24: Regular savings accounts shifted slightly towards shorter notice periods
- Figure 25: Average Interest rates remain considerably higher for fixed rate accounts
- Figure 26: Interest rates have remained constant compared to the massive fall in the Bank of England base rate
- Figure 27: Building societies rates have dropped substantially but remain higher than those offered at banks
- Figure 28: The vast majority of accounts are accessible in multiple ways
- Figure 29: Offshore accounts dominated the foreign currency market
- Figure 30: The average rate of return on $100,000 or €100,000 has plummeted
- Figure 31: Kaupthing's collapse had a direct effect on the shift towards shorter notice periods in the overseas dollar and euro markets
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