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UK Savings 2014: Forecasts and Future Opportunities

UK Savings 2014: Forecasts and Future Opportunities

Summary

Years of below-inflation wage rises have adversely affected UK consumers' ability to save. At the same time, a recovery in consumer confidence has prompted a declining propensity to save. Consequently, retail deposits will grow at a modest CAGR of 4.0% during 2014-18, compared to 8.2% during 2000-07. Banks will have to use new strategies if they want to significantly grow this source of funding.

Synopsis

  • Inform your future plans with our five-year forecast for retail deposits.
  • Learn how to respond to consumers' attitudes towards saving and personal finance.
  • Discover what impact new products, innovations, and strategies will have on the savings market.
Reasons To Buy
  • What strategies will be most effective in attracting new retail deposits?
  • Which new savings innovations are being introduced to the market?
  • How much of an impact will regulatory developments have on the operation of the UK savings market?
Key Highlights

Consumers who plan ahead and have a preference for mobile banking are more likely than average to save. Those who struggle to manage their finances effectively are significantly less likely to save. Banks can cater for the latter through measures such as login-free transfers to savings accounts and alerts that warn users of excessive spending.

New innovations are coming to the aid of savers. RBS has refined its Savings Goal feature to offer guidance to those who are falling short of their goals. In the US, Digit is a new service that analyzes users' bank accounts and automatically moves appropriate amounts into a savings account every few days.

In order to reduce costs and pre-empt regulatory intervention, several providers are rationalizing their product ranges and significantly reducing the number of accounts on offer. Many banks have also stopped the practice of offering bonus rates for a limited period, in order to become more transparent and customer-friendly.


  • Executive Summary
    • Growth in retail deposits will be modest over the next few years
    • Many consumers lack the motivation to save
    • Critical success factors
      • Simplify product ranges and pricing structures
      • Cater for wealthier savers
      • Encourage those disinclined to save
  • Prologue
    • What are consumers after?
  • Retail Deposits Are Set for Slow Growth
    • Total retail savings will rise to £1,461bn by 2018
    • Improving consumer confidence has reduced the imperative to save
    • Declining real wages have reduced consumers' capacity to save
    • Lloyds Banking Group is maintaining its dominance in retail savings
  • Savings Behavior is Guided by Several Factors
    • Attitudes towards personal finance and the economy drive savings propensity
      • Banks should help high savers to make the best use of their funds
      • Non-savers should be guided by their banks towards adopting a savings habit
    • Motivations for saving vary by provider
      • Age is a key driver of savings motivations
    • Mobile enthusiasts demand a lot from their savings accounts
    • Fixed-term accounts continue to fall out of favor
      • Interest rate differentials between instant-access and fixed-term accounts are narrowing
  • The Main Providers Are Changing Their Tactics
    • Providers are rationalizing their product ranges
    • Introductory and bonus rates are starting to fall out of favor
      • RBS has axed bonus rates in the name of customer-centricity
      • Nationwide and HSBC have also simplified their pricing structures
    • More challenger brands are set to enter the market in 2015
      • Charter Savings Bank will provide funding for Precise Mortgages
      • Atom Bank and Starling Bank will focus on technology-led propositions
  • Innovation and Regulation Will Shape Savings Provision
    • Innovation will drive the development and use of savings products
      • Nationwide's Impulse Saver encourages frequent saving of small amounts
      • RBS has upgraded its Savings Goal tool to provide feedback on users' progress
      • American Express is sharing consumer data with a US regulator to assist savings strategies
      • Digit is a new tool that makes automated saving decisions for its users
      • Using high-interest current accounts to attract retail deposits is a costly strategy
    • Regulatory and government intervention will pose challenges for providers
      • The FCA is likely to mandate changes to the operation of the cash savings market
      • New pensioner bonds from NS&I will be highly competitive
  • Appendix
    • Abbreviations and acronyms
    • Supplementary data
      • Table Average weekly earnings and Consumer Price Index (CPI), January 2010-September 2014
      • Table Competitor share of UK retail deposits market (%), 2009-13
      • Table UK consumers: main reasons for saving (percentage responses), 2013
      • Table UK consumers: essential features in an ideal savings account (percentage responses), 2013
      • Table Private sector deposits with UK monetary financial institutions (£m), November 2012-October 2014
      • Table Average quoted household interest rates (%), November 2012-October 2014
      • Table Average quoted household interest rates for instant-access accounts (%), November 2012-October 2014
    • Methodology
      • Verdict Financial's 2013 Financial Services Consumer Insight Survey
    • Bibliography
    • Further reading

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