Financial Services Marketing to C1C2DEs: Market Assessment 2002

There are more skilled non-manual women than in any other category, and more men in intermediate than in skilled manual jobs. However, occupational classifications are opaque at best. The CDEs (the skilled, semi-skilled and unskilled workers and people on state benefits) tend to have an early start to earning. The men work a lot of overtime, and women lose out on promotion opportunities because of family responsibilities. Benefit rules discourage people on low incomes from trying to amass capital because of the small amounts they are allowed to keep if they do need state help. Opportunities for selling more financial services to middle- and lower-income groups lie particularly in secured and unsecured credit, low-risk savings, stakeholder pensions for middle earners, life insurance and equity release. Barriers include ignorance of, and indifference to, personal finance.

There are large income differentials between men and women, between working and non-working households, and between families with children and those without. Key Note reviews how incomes change with age. The unskilled saw their disposable incomes fall in 2000/2001. Skilled manual workers saw barely any rise in their household income. Saving is of dubious value for most low-income households and for many middle-income households. As at the start of April 2000, more than a quarter of all households in Great Britain had no savings at all, and nearly a quarter more had less than £1,500. Pensioner households are generally not income-rich but have more assets than average. The distribution of wealth was remarkably stable between 1976 and the mid-1990s, but between 1997 and 2001, the wealthiest profited at the expense of the poorest half of the population, who hold little marketable wealth.

There is little difference between the amounts households save and the amounts going to repay loans. The households in the lowest 10% by income spent very little on financial services in 2000/2001. The second and third deciles also had low spending. For the fourth, fifth and sixth deciles, there was only a marginal difference between savings and investments and payments for debt repayment loans. The boom in credit is clear from a rise of over a third in net lending between 1999 and 2001. The amount outstanding in loans to individuals is over 20 times greater than gross annual household saving. Catalogue finance, though, should remain an effective way of drawing in and retaining women customers for financial services. Credit unions have potential for reducing financial exclusion that has been under used in the UK.

Consumer research carried out for this report suggests that customers are moderately (but not overwhelmingly) happy with the service they receive from financial-services companies, and moderately (but not overwhelmingly) keen on leaving financial assets to their children or other relatives. Alarmingly, more than one skilled non-manual worker in eight says that, excluding a mortgage to buy their home, they owe more than they have in savings. The figures point to the fact that people who are offered credit, use it. In general, people place buying luxuries above saving, but many feel guilty when they do spend. However, the survey indicates that people are taking pensions more seriously than they were in 2001 — people have subscribed to stakeholder pensions in larger numbers than seemed likely before their launch.

The exclusion from affordable — or any — insurance cover of the customers most likely to claim is a particular issue for those on average and below-average incomes. In addition, the extent of credit and indebtedness means it is difficult for many people on middle and low incomes to find money to save. Key Note argues that the private sector should not be asked to double as a financial welfare service and say that it will not be possible for the private sector to deliver all the financial security that people want. Mutual and not-for-profit organisations are better placed than commercial companies to provide financial services for people on middling and low incomes, because they have no shareholders to satisfy. However, the approximate 20 banks with basic accounts available through post offices have a good starting point of building relationships with customers, and the nation's post offices are probably the best locations for banks and insurers to promote good-value products to lower-income customers.

1. Introduction

• The Topic
  
• Objectives
  
• Methodology
  
• Research Process
  
• Original Research
  
• Problems In The Research Process
  
• Definition

2. Strategic Overview

• Cloudy Classifications
  
• Table 1: Occupational Status Of People Of Working Age In The UK By Sex (Million), 1999 And 2001
  
• Table 2: Occupational Status Of People Aged 16 And Over In Employment In The UK By Sex (Million And %), Winter 2001/2002†
  
• Financial Lifecycles
  
• Opportunities And Barriers
  
• The Sandler And Pickering Reports: Likely Implications

3. Income Patterns

• Sources Of Income
  
• Table 3: Composition Of Household Income In The UK (% And £Bn), 1987-2000
  
• Income Levels
  
• Table 4: Income Bands By Total Income Before Tax By Sex (000 And %), 2002/2003†
  
• Table 5: Estimated Number Of People In Each Income Quintile In Great Britain (Million), 1999/2000
  
• Table 6: Weekly Income And Source Of Income By Household Composition In The UK (% And £), 2000/2001
  
• Table 7: Income And Source Of Income By Age Of Head Of Household In The UK (% And £), 2000/2001
  
• Table 8: Household† Income By Socio-Economic Group Of Head Of Household (Million And £), 1999/2000 And 2000/2001
  
• Savings
  
• Table 9: Profile Of Pensioner Households In Great Britain By Amount Of Savings Compared With Households Overall (Million And %), 1999/2000†
  
• Table 10: Net Wealth Of The Household Sector In The UK (£Bn And %), 1987-2001
  
• Table 11: Distribution Of Marketable Wealth Including Dwellings In The UK (%), 1976, 1998, 1999 And 2002
  
• Table 12: Distribution Of Marketable Wealth Excluding Dwellings In The UK (%), 1976, 1998, 1999 And 2002

4. The Revolving Door

• Loan Repayments Replace Savings
  
• Table 13: Average Weekly Household Expenditure On Financial Services In The UK (£), 1997/1998, 1999/2000 And 2000/2001
  
• Table 14: Weekly Spending On Financial Services By Income Decile (£ Per Week), 2000/2001
  
• Pension Gaps
  
• Table 15: Pension-Scheme Membership In The UK By Sex And Occupational Status (%), 1999/2000
  
• Private Medical Insurance Costly For Individuals
  
• Table 16: Subscribers To Private Medical Insurance In The UK (000), 1990-2000
  
• Credit Burden
  
• Table 17: Total Net Lending To Individuals In The UK (£M And %), 1999-2001
  
• Table 18: Amounts Outstanding: Loans To Individuals In The UK (£M), End Of May 2002
  
• Table 19: Lending Secured On Dwellings — Approvals For House Purchases, Remortgages And Other Loans (£M), 2001
  
• Figure 1: Lending Secured On Dwellings — Approvals For House Purchases, Remortgages And Other Loans (£M), 2001

5. Basic Banking

• Banks With Basic Accounts
  
• Alternatives To Bank Branches
  
• Paypoint
  
• Atms
  
• Cheque Cashing
  
• Pooled Savings

6. Supermarket Banking

• Sainsbury's Bank
  
• Tesco Personal Finance
  
• Morrisons
  
• Safeway
  
• Co-Operative Group
  
• Marks & Spencer

7. Loans For Lower Incomes

• Debt Consolidation
  
• Banks Going For Subprime Customers
  
• Home Credit Set For UK Decline?
  
• Provident Financial
  
• Park Group
  
• Trade Associations
  
• Catalogue Finance
  
• Credit Unions

8. Specialising In The Elderly

• Saga And The Over-50s
  
• Transforming Property Into Cash

9. Safer Savings

• National Savings And Investments
  
• Table 20: National Savings — Sample Interest Rates (%), 16th September 1999 And 1st August 2002
  
• Friendly Societies

10. Advertising And Promotion

• Main Media Advertising
  
• By Financial-Services Groups
  
• Table 21: Main Media Advertising Expenditure By Financial-Services Groups (£M), Years Ending September 1999, December 2000 And March 2002
  
• Figure 2: Main Media Advertising Expenditure By Financial-Services Groups (£M), Years Ending September 1999, December 2000 And March 2002
  
• By Principal Categories
  
• Table 22: Principal Categories Of Main Media Financial-Services Advertising Expenditure (£M), Years Ending September 1999, December 2000 And March 2002
  
• By Major Products
  
• Table 23: Main Media Advertising Expenditure On Financial-Services Products (£M), Years Ending September 1999, December 2000 And March 2002
  
• Equity Release
  
• Independent Advice
  
• Satellite And Cable Are Important Channels
  
• Manual Workers Opt For Sport
  
• Huge Rise In Direct Mail
  
• Postcode Targeting
  
• Table 24: Selected Experian Financial Strategy Segments (% And 000)
  
• Britannic Extends To Impaired-Credit Customers

11. An International Perspective

• Important Role For Credit Unions
  
• The Lure Of Eastern Europe
  
• Globalisation Of Financial Services Is For The Affluent, Not The Workers
  
• Banks
  
• Insurers

12. Opportunities For And Threats To Financial Services

• Opportunities
  
• Attractions Of Intermediate Non-Manual Households
  
• Table 25: Average Household Disposable Income And Spending By Occupational Group (£ Per Week), 2000/2001
  
• Table 26: Average Household Disposable Income And Spending By Age Of Head Of Household (£ Per Week), 2000/2001
  
• Boost For Public Sector
  
• Big Potential Impact From Income Redistribution
  
• The Ageing Population
  
• Table 27: UK Population Change By Age And Sex (Million), 1901-2025
  
• Solo Living
  
• Table 28: Changing Household Composition In Great Britain (Million), 1961, 1971, 1981, 1991 And 2001
  
• Figure 3: Changing Household Composition In Great Britain (Million), 1961, 1971, 1981, 1991 And 2001
  
• Threats
  
• Lack Of Confidence In The Internet
  
• Pain In The Middle

13. Consumer Dynamics

• Overview
  
• Table 29: Summary Of Responses To The Nop Survey (% Of Respondents), 2002
  
• Net Debt And Pension Contributions
  
• Table 30: Net Debt And No Pension Contributions (% Of Respondents), 2002
  
• Contributing To A Stakeholder Pension And Private Medical Treatment
  
• Table 31: Contributing To Stakeholder Pensions And Private Medical Treatment (% Of Respondents), 2002
  
• Attitudes Towards Saving
  
• Table 32: Attitudes Towards Saving (% Of Respondents), 2002
  
• Saving Loses Entitlement To Benefit And Wanting To Leave Financial Assets To Relatives
  
• Table 33: Saving Loses Entitlement To Benefits And Wanting To Leave Financial Assets To Relatives (% Of Respondents), 2002
  
• Property Is A Safer Investment Than Shares And Directors And Senior Managers Of Loss-Making Companies Should Not Receive Bonuses
  
• Table 34: Investing In Property And Senior Managers Of Loss-Making Companies Should Not Receive Bonuses (% Of Respondents), 2002
  
• Quality Of Financial Advice And Satisfaction With The Standard Of Service From Banks, Building Societies And Insurance Companies
  
• Table 35: Quality Of Financial Advice And Standards Of Service From Banks, Building Societies And Insurance Companies (% Of Respondents), 2002
  
• Dissatisfaction With Service From Banks, Building Societies And Insurance Companies, And Using The Internet For Financial Products
  
• Table 36: Dissatisfaction With Customer Service, And Use Of The Internet For Financial Products (% Of Respondents), 2002
  
• Weak Confidence In Internet Banking And Preference For Local Branches
  
• Table 37: Weak Confidence In Internet Banking And Preference For Local Branches (% Of Respondents), 2002

14. Company Profiles

• Introduction
  
• Table 38: Largest Banks And Insurers In The UK Ranked By Market Capitalisation (£Bn), 31st December 2000 And 2001 And 26th July 2002
  
• Abbey National Group Plc
  
• Corporate Strategy
  
• Advertising And Distribution
  
• Profitability
  
• Table 39: Key Figures For Abbey National Group Plc (£M, Pence And %), Years Ending 31st December 1997-2001
  
• Future Developments
  
• Alliance & Leicester Plc
  
• Corporate Strategy
  
• Advertising And Distribution
  
• Profitability
  
• Table 40: Key Figures For Alliance & Leicester Plc (£M, Pence And %), Years Ending 31st December 1997-2001
  
• Future Developments
  
• Aviva Plc
  
• Corporate Strategy
  
• Advertising And Distribution
  
• Profitability
  
• Table 41: Key Figures For Aviva Plc (£M, Pence And %), Years Ending 31st December 1997-2001
  
• Future Developments
  
• Barclays Plc
  
• Corporate Strategy
  
• Advertising And Distribution
  
• Profitability
  
• Table 42: Key Figures For Barclays Plc (£M, Pence And %), Years Ending 31st December 1997-2001
  
• Future Developments
  
• Hbos Plc
  
• Corporate Strategy
  
• Advertising And Distribution
  
• Profitability
  
• Table 43: Key Figures For Hbos Plc (£M, Pence And %), Years Ending 31st December 1997-2001
  
• Future Developments
  
• Hsbc Plc
  
• Corporate Strategy
  
• Advertising And Distribution
  
• Profitability
  
• Table 44: Key Figures For Hsbc Plc (£M, Pence And %), Years Ending 31st December 1997-2001
  
• Future Developments
  
• Lloyds Tsb Group Plc
  
• Corporate Strategy
  
• Advertising And Distribution
  
• Profitability
  
• Table 45: Key Figures For Lloyds Tsb Group Plc (£M, Pence And %), Years Ending 31st December 1997-2001
  
• Future Developments
  
• Provident Plc
  
• Corporate Strategy
  
• Advertising And Distribution
  
• Profitability
  
• Table 46: Key Figures For Provident Plc (£M, Pence And %), Years Ending 31st December 1999-2001
  
• Future Developments
  
• Prudential Plc
  
• Corporate Strategy
  
• Advertising And Distribution
  
• Profitability
  
• Table 47: Key Figures For Prudential Plc (£M, Pence And %), Years Ending 31st December 1997-2001
  
• Future Developments
  
• Royal & Sun Alliance Insurance Group Plc
  
• Corporate Strategy
  
• Advertising And Distribution
  
• Profitability
  
• Table 48: Key Figures For Royal & Sun Alliance Insurance Group Plc (£M, Pence And %), Years Ending 31st December 1997-2001
  
• Future Developments
  
• Royal Bank Of Scotland Group Plc
  
• Corporate Strategy
  
• Advertising And Distribution
  
• Profitability
  
• Table 49: Key Figures For Royal Bank Of Scotland Group Plc (£M, Pence And %), Years Ending 31st December 1997-2001
  
• Future Developments
  
• Sainsbury's Bank
  
• Corporate Strategy
  
• Advertising And Distribution
  
• Profitability
  
• Table 50: Key Figures For J Sainsbury Plc (£M, Pence And %), Years Ending 31st March 1998-2001 And 30th March 2002
  
• Future Developments
  
• Tesco Personal Finance
  
• Corporate Strategy
  
• Advertising And Distribution
  
• Profitability
  
• Table 51: Key Figures For Tesco Plc (£M, Pence And %), Years Ending 22nd February 2000-2002
  
• Future Developments

15. The Future

• Retirement At 70?
  
• Care Home Conundrum
  
• Insurance Not Always Affordable
  
• Tiered Services
  
• £62bn Annual Savings Gap
  
• The Outlook For Wealth
  
• Table 52: Savings And Investments In The Household Sector (£Bn), 1995 And 2000-2002
  
• Table 53: Forecast Wealth Of The Household Sector In The UK At Constant 2000 Prices (£Bn), 2002-2005
  
• Table 54: Estimated Value Of Household Sector Wealth In The UK At Constant 2000 Prices (£Bn And £), 18th July 2002
  
• Table 55: Estimated Holdings Of Savings And Investment Products In The UK By Cdes At Constant Prices (% And £Bn), 2002 And 2005
  
• What Now For Financial Services?
  
• Private Sector Is Not A Social Service
  
• Episodic Marketing
  
• Organisations To Watch

17. Further Sources

• Associations
  
• Publications
  
• General Sources
  
• Bonnier Information Sources
  
• Government Publications
  
• Other Sources