UK Savings and Investments 2005: Industry Report

UK Savings and Investments 2005

Product Type: Market Research Report
Published by: Datamonitor
Published: August 2005
Product Code: R313-11748

Description

Introduction
Providing analysis on retail balances, flows, customer insights, the performance of leading competitors and market forecasts to 2009, UK Savings and Investments 2005 is the definitive guide to the retail savings and investment market in the UK.

Scope
Full analysis of UK savings and investment sectors including deposits, ISAs, unit trusts/OEICs, investment trusts, National Savings, bonds and equity
Sizes and segments all key product sectors over the 2000-2004 period with forecasts through to 2009.
A selection of consumer data covering behaviours, attitudes and approaches to savings and investments sourced from a recent Datamonitor survey
Highlights
As a result of positive economic developments, the UK retail savings and investments market experienced another year of growth in 2004, with total balances increasing by 9.7%. Although the increase was slightly below the growth experienced in 2003, the total value of retail savings and investments in the UK reached GBP1.5trn in 2004.

Best buy tables are the source of information that most UK consumers rely on when choosing a savings or investment product, with 36.3% of consumers questioned selecting this option.

On the basis of a positive economic outlook for the next five years, Datamonitor expects that UK retail savings and investments balances will grow at a compound annual rate of 7.0% per year.

Reasons to Purchase
Assess the relative size and industry dynamics in each of the core savings and investment markets to clearly identify the key strategic issues
Gain a detailed view of competitive developments in each market sector including comprehensive competitor data and market share information
Access independent forecasts of UK savings and investment markets to identify product sectors for future investment.

Table of Contents

EXECUTIVE SUMMARY

Market Context

Customer attitudes

Deposits

National Savings and Investments

Unit Trusts and OEICs

Investment Trusts

Direct Equity

The Future Decoded

INTRODUCTION

What is this report about?

Who is the target reader?

How to use this report

CHAPTER 1 MARKET CONTEXT

Introduction

Key findings

UK retail savings and investments have shown healthy growth in 2004 spurred by positive economic developments

House prices set the scene for strong balance growth

UK retail savings and investments balances reached GBP1.5trn in 2004

Deposits remain the biggest asset class but money is returning to unit trust and OEICs

Flows data confirms that new money is being invested in equity-related vehicles, but deposits remain key

Data

CHAPTER 2 CUSTOMER ATTITUDES

Introduction

Key findings

Recommendations are valued most when choosing bank accounts, while best buy tables prove important for investment decisions

Recommendations and personal experience are key for customers when choosing a bank account

Best buy tables are crucial in decision making regarding savings and investments products

Bank account customers are less likely to switch provider on the basis of poor customer service than those with savings or investment policies

In the case of bad service relating to a bank account, UK consumers are most likely to complain but maintain the relationship

In the case of bad service relating to a savings or investment product, UK consumers are most likely to close down the entire relationship

UK consumers are relatively indifferent regarding the use of advisors/brokers

Data

CHAPTER 3 DEPOSIT ACCOUNTS

Introduction

Key findings

The deposit market has enjoyed strong growth in balances since 2000

Deposits are by far the largest savings and investments vehicle in the UK market and account for 49% of total retail assets

Growth in interest bearing sight accounts has been the primary driver in deposit growth

Personal deposit balance growth is now being driven by net inflows rather than accumulated interest

The deposit market is showing signs of increased competition

Continued pressure from direct providers is eroding the share of the big deposit takers

HBOS continues to dominate the market for deposits in the UK

Increased competition is squeezing deposit interest rates

There is only a limited correlation between growth in market share and advertising expenditure

Data

CHAPTER 4 NATIONAL SAVINGS AND INVESTMENTS

Introduction

Key findings

The proportion of total UK savings and investments balances accounted for by NS&I has not seen significant fluctuation

NS&I accounted for less than 5% of the UK retail savings and investments market in the year ending December 2004

Balances have now topped the March 2000 level, but growth is driven predominantly by Premium Bonds

NS&I funds reached GBP66.5bn in March 2004

Premium bonds continue to drive the growth in NS&I balances

GEBs and ISAs have supported the balance growth but only to a limited extent

Fund growth has been restricted by other products

Key NS&I products are no longer proving as attractive

Net inflows to NS&I products have been positive for the past two years

NS&I suffered net outflows between December 2000 and December 2002

2003 and 2004 have seen net inflows

Rejuvenation is underway under the banner “Direction 2007”

“Direction 2007” aims to grow balances to GBP78bn by the end of the financial year 2007/08

NS&I has been tweaking its product range

Distribution channels are undergoing a makeover

The resulting business is now fit for the 21st Century

Marketing and advertising continues to focus on being the “safe, smart and straightforward choice”

Direct Mail represents the key advertising method

Data

CHAPTER 5 INDIVIDUAL SAVINGS ACCOUNTS (ISAS)

Introduction

Key findings

The UK ISA market continues to grow but investors are heavily biased towards Mini and cash ISAs

Balances continue to show strong growth but gross sales are declining

Sales of Mini ISAs are consistently outstripping Maxi sales…

…but predominantly due to Mini cash ISAs

Subscriptions growth is limited with most relating to Mini Cash ISAs

Average values of ISA subscriptions, with the exception of Mini Cash ISAs, are still well below the maximum allowed and have been declining

Building societies continue to leave the banks behind in the cash ISA rates war

The unit trust/OEIC ISA market is becoming less concentrated, while IFAs and fund supermarkets are playing an increasingly important role

The top ten players remain relatively unchanged compared to 2003, but their market shares have generally fallen

The growth of the direct and IFA distribution channels is bringing smaller players into play

Half of the top ten ISA advertisers are among the ten largest unit trust/OEIC ISA fund managers

Legal & General continues to be the largest spender on ISA advertising

ISA holders are typically over 45 years old, with over GBP300 weekly household income

Women are more likely to have an ISA than men

ISAs continue to be a tax-efficient vehicle for the wealthy

The regional distribution of ISA holders is relatively evenly spread

The Government has backed down to make ISAs more attractive

The ISA annual investment limit has been extended

Life Insurance products have been merged into stock and shares ISAs, while all FSA regulated collective investments can now be included

New stakeholder products introduced to be included within an ISA wrapper

Data

CHAPTER 6 UNIT TRUSTS AND OEICS

Introduction

Key findings

The unit trust & OEIC market is now as strong as ever

Retail unit trust & OEICs have increased their share of the overall UK savings and investment market

Retail funds dominance of the unit trust and OEIC market continues to characterize the UK market

Intermediaries have driven the recovery in unit-trust and OEIC retail sales

The unit trust market has shown signs of concentrating around key providers

Fidelity still dominates the UK unit trust and OEIC market

New Star spent the most money on advertising in 2004

Increased equity exposure has boosted unit trust and OEIC returns and increased the products popularity

Proportion of people holding unit trusts has fallen in 2004

High earners have seen the biggest fall in unit trust & OEIC ownership

7% of households in the South East and South West hold a unit trust investment

There are only two age bands where males do not have a higher level of unit trust holdings than females

Data

CHAPTER 7 INVESTMENT TRUSTS

Introduction

Key findings

The market for investment trusts recovered in 2004

Investment trusts account for only 2% of total retail savings and investment assets

A recovery in retail funds under management has driven the overall investment trust market

Growth in assets have been driven by smaller trusts outside of the top 10 providers

Specialized trusts have increased their popularity in comparison to traditional areas

Improved returns have boosted the popularity of investment trusts

Data

DIRECT EQUITY

Introduction

Key findings

The retail direct equity market has shown only limited signs of recovery

The share of total retail assets held in equities has dropped substantially

Individuals have increased their share of total beneficial ownership of UK equities

Total retail quoted balances have continued to recover since 2002

Execution only trades have been hardest hit by the downturn in markets

The internet is set to become the key means for carrying out execution only transactions

Individual share ownership levels have fallen since 2002 regardless of investors’ age, income and sex

Data

CHAPTER 8 THE FUTURE DECODED

Introduction

Key findings

Positive economic conditions are expected to boost savings and investments balances to more than GBP2trn by 2009

Datamonitor expects the stockmarket to pick up over the next couple of years, while real GDP will remain at approximately 2.5% growth per year

UK retail savings and investments balances are expected to grow at a compound annual rate of 7.0% until 2009

Unit trusts/OEICs are expected to grow fastest over both the short and medium term

Data

APPENDIX

Definitions

Research methodology

Flows methodology

Market share methodology

Forecasting methodology

Further Reading

Datamonitor Global Wealth Service SPP: Reports

Datamonitor Global Wealth Service SPP: Insight Reports

Datamonitor Wealth Management Competitor Tracker

Datamonitor Asia Pacific Wealth Management SPP: Reports

Datamonitor Savings & Investments SPP: Reports & Briefs

SPP writing team

LIST OF TABLES

Table 1: Growth in key savings and investments market drivers, indexed, 2000-2004

Table 2: Total value of UK retail savings and investments market by broad product line, 2000-2004

Table 3: Balances growth by broad product line in the UK retail savings and investments market, 2000-2004

Table 4: Total net inflows in UK retail savings and investments by broad product line, 2000-2004

Table 5: Which source of information would you most rely on if you were considering which bank account to open? Split by age

Table 6: Which source of information would you most rely on if you were considering which bank account to open? Split by income

Table 7: Which source of information would you most rely on if you were considering which bank account to open? Split by gender

Table 8: Which source of information would you most rely on if you were considering which savings or investment policy to open? Split by age

Table 9: Which source of information would you most rely on if you were considering which savings or investment policy to open? Split by income

Table 10: Which source of information would you most rely on if you were considering which savings or investment policy to open? Split by gender

Table 11: If I received poor customer service regarding a bank account, I would…, split by age

Table 12: If I received poor customer service regarding a bank account, I would…, split by income

Table 13: If I received poor customer service regarding a bank account, I would…, split by gender

Table 14: If I received poor customer service regarding a savings or investment policy, I would…, split by age

Table 15: If I received poor customer service regarding a savings or investment policy, I would…, split by income

Table 16: If I received poor customer service regarding a savings or investment policy, I would…, split by gender

Table 17: Average of “To what extent do you agree or disagree with the following statements?”, split by age

Table 18: Average of “To what extent do you agree or disagree with the following statements?”, split by gender and income

Table 19: To what extent do you agree or disagree with the following statement? I am willing to pay for financial advice, split by age

Table 20: To what extent do you agree or disagree with the following statement? I am willing to pay for financial advice, split by income and gender

Table 21: To what extent do you agree or disagree with the following statement? Advice from banks is more trustworthy than from independent financial advisors, split by age

Table 22: To what extent do you agree or disagree with the following statement? Advice from banks is more trustworthy than from independent financial advisors, split by income and gender

Table 23: To what extent do you agree or disagree with the following statement? I am likely to move financial provider if my advisor moves to a new company, split by age

Table 24: To what extent do you agree or disagree with the following statement? I am likely to move financial provider if my advisor moves to a new company, split by income and gender

Table 25: To what extent do you agree or disagree with the following statement? I prefer to use a broker/advisor to help manage my finances, split by age

Table 26: To what extent do you agree or disagree with the following statement? I prefer to use a broker/advisor to help manage my finances, split by income and gender

Table 27: To what extent do you agree or disagree with the following statement? I would consider using a broker/advisor as I do not have enough time to manage my finances myself, split by age

Table 28: To what extent do you agree or disagree with the following statement? I would consider using a broker/advisor as I do not have enough time to manage my finances myself, split by income and gender

Table 29: To what extent do you agree or disagree with the following statement? I would consider using a broker/advisor as I do not have enough knowledge to manage my finances myself, split by age

Table 30: To what extent do you agree or disagree with the following statement? I would consider using a broker/advisor as I do not have enough knowledge to manage my finances myself, split by income and gender

Table 31: UK Personal deposit market concentration 2003-2004

Table 32: UK personal deposit account balances by competitor, 2001-2004

Table 33: ING Direct total clients and funds entrusted 2003-2004

Table 34: Total UK retail assets segmented by savings and investment vehicle 2000-2004

Table 35: Total UK personal deposit balances by holding institution, 2000-2004

Table 36: Total UK personal deposit balances split by product 2000-2004

Table 37: Year-on-year growth in total UK personal deposit balances by holding institution, 2003-2004

Table 38: Breakdown of UK personal deposit balances and net inflows, 2000-2004

Table 39: Weighted average interest rates on sight and time deposits offered to UK households versus base rates, December 2002 - February 2005

Table 40: Market share of UK personal deposit account balances, 2001-2004

Table 41: Concentration of UK personal deposit market among top ten players, 2001-2004

Table 42: Top 20 current/high interest current account advertisers, 2004

Table 43: Top 20 savings account advertisers, 2004

Table 44: Advertising spend of the top 20 savings account advertisers in 2004 compared to their spend in 2003

Table 45: Total advertising expenditure vs change in total deposits 2003-2004

Table 46: Interest rates payable on the EASA and Investment Account as at 15 June 2005

Table 47: National Savings balances as a proportion of total UK savings and investments balances, 2000-2004

Table 48: Funds invested with National Savings and Investments by product, March 2000-March 2004

Table 49: Contribution by product to change in total NS&I invested funds, March 2003-March 2004

Table 50: Breakdown of National Savings invested funds and net inflows, 2000-2004

Table 51: Proportion of households in each region with Premium bonds, 2002-2004

Table 52: Proportion of UK adults in each age band with Premium Bonds, 2002-2004

Table 53: Proportion of households in each total weekly income bracket with Premium Bonds, 2002-2004

Table 54: NS&I advertising spend by product type, 2003-2004

Table 55: NS&I advertising spend by channel, 2004

Table 56: Best rate instant access/no notice Mini Cash ISA, June 2005

Table 57: Worst rate instant access/no notice Mini Cash ISA, June 2005

Table 58: Selected instant access/no notice Mini Cash ISAs available from high street providers

Table 59: Market value of funds held in ISAs by component at calendar year end, 2000-2004e

Table 60: Gross ISA sales in the UK, 2000-2004

Table 61: Gross ISA sales in the UK by quarter, Q1 2000-Q4 2004

Table 62: Gross Mini ISA sales in the UK, 2000-2004

Table 63: Gross Mini-ISA sales in the UK by quarter, Q1 2000-Q4 2004

Table 64: Gross Maxi-ISA sales in the UK, 2000-2004

Table 65: Gross Maxi-ISA sales in the UK by quarter, Q1 2000-Q4 2004

Table 66: Indexed growth of gross UK ISA sales, 2000-2004

Table 67: Number of new ISA accounts opened in the UK by account type, 2000-2004

Table 68: Average subscription per ISA account in the UK, tax year end, 2000-2004

Table 69: Gross unit trust and OEIC ISA sales split by distribution channel, 2000-2004

Table 70: Unit trust and OEIC ISA funds under management in the UK by fund managers, top 30, 2001-2004

Table 71: Market shares of unit trust and OEIC ISA funds under management in the UK by fund managers, top 30, 2001-2004

Table 72: Top 20 ISA advertisers, 2004

Table 73: Advertising spend of the top 20 ISA advertisers in 2004 compared to their spend in 2003

Table 74: Proportion of households in each region with an ISA, 2002-2004

Table 75: Proportion of males in each age band with ISAs, 2002-2004

Table 76: Proportion of females in each age band with ISAs, 2002-2004

Table 77: Proportion of UK adults in each age band with ISAs, 2002-2004

Table 78: Proportion of households in each total weekly income bracket with ISAs

Table 79: Retail funds under management segmented by components 2000-2004

Table 80: Total value of UK retail savings and investments market by broad product line, 2000-2004

Table 81: Unit Trust & OEIC funds under management segmented by type of investor

Table 82: Top 30 unit trust and OEIC managers by funds under management 2001-2004

Table 83: Top 30 unit trust and OEIC managers by funds under management 2001-2004 (continued)

Table 84: Market share of top six unit trust & OEIC managers 2003-2004

Table 85: Net retail unit trust and OEIC inflows 2000-2004

Table 86: Gross retail sales by distribution channel 2000-2004

Table 87: Total number of funds, companies and OEIC providers 2000-2004

Table 88: Total funds under management split by ISA, PEP and OEIC

Table 89: Asset allocation of UK unit trust and OEIC 2001-2004

Table 90: Market share of top 5 and top 10 competitors by funds under management 2001-2004

Table 91: Top six providers by unit-trust and other trust advertising expenditure 2004

Table 92: Percentage of households with unit-trust investments by UK region 2003-2004

Table 93: Proportion of adults holding a unit-trust investment, 2004

Table 94: Percentage of households with unit-trust investments by income 2000-2004

Table 95: Top six Investment segments by growth in assets under management 2001-2004

Table 96: Total value of UK retail savings and investments market by broad product line, 2000-2004

Table 97: Retail and institutional investment trusts funds under management 2000-2004

Table 98: Beneficial ownership of UK Investment trusts 2002-2003

Table 99: Approximate performance of GBP100 invested by investment trust sector 1 year, 3 year, 5 year and 10 year (2004 base year)

Table 100: Total assets of top 30 investment trust management groups and market share December 2004

Table 101: Top 10 investment trusts within the Global Growth sector of investment trusts, 2004

Table 102: Total assets under management segmented by relative size 2001-2004

Table 103: Top seven funds under management by investment segment 2001-2004

Table 104: Total value of UK retail savings and investments market by broad product line, 2000-2004

Table 105: UK share ownership by beneficial owner 1999-2003

Table 106: Total retail equity balances by share type, retail equity balance change due to capital appreciation and retail net inflows 2000-2004

Table 107: Number of UK equity trades transacted by market firms

Table 108: Share of total execution only transactions by method of transaction

Table 109: Share of total transactions held in nominee or certificated form

Table 110: Proportion of UK adults with share holdings by age 2002-2004

Table 111: Proportion of male and females adults holding shares 2002-2004

Table 112: Proportion of households holding shares by weekly income bands 2002-2004

Table 113: Share ownership by UK region 1999-2004

Table 114: Key macro-economic variables forecasted, 2004-2009f

Table 115: Forecasted value of UK retail savings and investments by broad product line, 2004-2009f

Table 116: Balances growth by broad product line in the UK retail savings and investments market, 2004-2009

LIST OF FIGURES

Figure 1: House prices continue to be the main underlying driver to savings and investments growth

Figure 2: The total value of UK retail savings and investments has grown 9.7% between 2003 and 2004

Figure 3: Deposits accounted for almost half of UK savings and investments in 2004

Figure 4: Deposits have shown the best growth over the medium term, while over the last year unit trusts have shown strong balance growth

Figure 5: Direct equities have recorded positive net inflows in 2004 compared to a net outflow of GBP34.1bn in 2003

Figure 6: Recommendations are more important than best buy tables for bank accounts

Figure 7: Females are more likely to rely on the personal experiences of either themselves or friends/family when choosing a bank account

Figure 8: Best buy tables rival advisors when choosing savings or investment products

Figure 9: Female investors appear to favor advisors when gaining information on savings or investment policies

Figure 10: Customers over 65 are highly unlikely to switch provider if they receive bad service regarding their bank account

Figure 11: There are few differences between males and females in terms of their reactions to bad service relating to a bank account

Figure 12: UK consumers are more reactive to bad service regarding their investments than day to day banking

Figure 13: Men are more likely to close down the relationship entirely if they receive bad service regarding a savings or investment policy

Figure 14: More than a third of people agree that they would consider using a financial advisor as they do not have sufficient knowledge to manage their finances themselves

Figure 15: Deposit balances now account for just under half of total savings and investments in the UK, 2000-2004

Figure 16: Total UK personal deposit balances have now reached GBP718bn

Figure 17: Growth in personal deposits is increasingly being driven by strong net inflows

Figure 18: ING Direct has pushed Bradford & Bingley out of the top ten UK deposit takers

Figure 19: Interest rates are up, but are squeezing margins for sight deposit providers

Figure 20: There is only a limited link between amount spent of advertising and increase in personal deposits

Figure 21: First direct have spent the greatest amount on advertising current accounts

Figure 22: ING Direct have sent the most on savings account advertising

Figure 23: Growth in NS&I balances has been more stable than the overall market

Figure 24: Premium Bonds continue to drive NS&I’s balance growth

Figure 25: Premium Bonds accounted for 36.5% of total NS&I invested funds as at March 2004

Figure 26: The South of the UK has the greatest concentration of Premium Bonds holders, 2003-2004

Figure 27: Premium Bond holdings are highly correlated with household income

Figure 28: Premium Bonds predominantly attract those over 45

Figure 29: After Premium Bonds, the balances of the next four most popular products have been declining since March 2000

Figure 30: Of the top five products, only Premium Bonds made a positive contribution to total balances between March 2003 and March 2004

Figure 31: NS&I net inflows eased off in 2004

Figure 32: The direct mail channel continues to account for a significant proportion of the advertising budget

Figure 33: Almost 30% of NS&I’s advertising budget in 2004 was spent on the Guaranteed Equity Bond

Figure 34: The value of funds held in ISAs has witnessed strong growth since 2000 but gross sales have been falling significantly

Figure 35: Maxi ISAs are increasingly dominating gross ISA sales

Figure 36: Maxi ISAs now account for only 22% of gross ISA sales in the UK

Figure 37: Mini Cash ISAs are proving to be the most popular option in terms of sales

Figure 38: Subscriptions to Maxi ISAs have been declining at a compound annual rate of 20.7%

Figure 39: Average values of ISA subscriptions are still well below the maximum allowed

Figure 40: Most of the top ten unit trust/OEIC ISA providers have all lost market share during 2004

Figure 41: Distribution of unit trust/OEIC ISAs through sales forces/tied agents is declining

Figure 42: The market leader Legal & General continues to invest heavily in advertising its ISAs

Figure 43: Over the age of 64, males are more likely to hold an ISA than females in the UK

Figure 44: ISAs penetration in low income households is still poor

Figure 45: The South East of the UK has the greatest concentration of ISA holders, 2003-2004

Figure 46: Retail unit trusts and OEICs assets have increased their share of the overall UK retail savings market to 16.9% in 2004

Figure 47: Growth in retail unit trusts and OEICs has driven the overall market

Figure 48: A 10% increase in gross inflows in 2004 has been offset by a 30% increase in retail repurchases

Figure 49: Intermediaries market share of retail unit trust and OEIC sales has increased from 61% to 71% in 2004

Figure 50: The top five units trusts and OEICs have increased their share of total FuM by 2 percentage points since 2001

Figure 51: OEICs accounted for nearly 59% of the total number of UK funds in 2004

Figure 52: OEIC funds now account for 63% of assets under management

Figure 53: Fidelity have a 9.2% share of the market by funds under management, 2004

Figure 54: New Star spent more on advertising unit trusts than any other provider in 2004

Figure 55: UK unit-trusts and OEICS have increased exposure to UK equities since 2003

Figure 56: 2004 saw a continued decline in the number of households with unit-trust holdings

Figure 57: People in the South West and South East are most likely to hold unit-trusts

Figure 58: Males aged 65-74 are the most likely to hold unit-trust investments, 2004

Figure 59: Retail investment trusts assets account for only 2.1% of total retail savings and investment assets

Figure 60: Strong recent retail investment trust growth has driven the overall investment trust market

Figure 61: Individuals have increased their share of overall investment trust assets by over 22 percentage points between 2002-2003

Figure 62: The percentage of total funds held outside of the top ten has increased by six percentage points since 2001

Figure 63: JP Morgan Fleming are now the largest investment trust manager by assets, December 2004

Figure 64: Global growth funds remain the largest investment trust sector by assets under management despite funds declining since 2001

Figure 65: Most investment trusts have managed to stabilize returns in the last three years despite falling markets, 2004

Figure 66: The share of retail assets held in direct equity has fallen from 38.6% in 2000 to 25.0%

Figure 67: Total individual beneficial ownership of shares has increased by 38bn between 2002-2003

Figure 68: Total retail holdings of quoted UK stocks have shown continued signs of recovery since 2002.

Figure 69: Quoted stocks continue to experience negative net inflows despite strong recent capital appreciation

Figure 70: The number of private client execution only trades has increased in 2003

Figure 71: The share of total execution only transactions carried out over the internet has risen considerably since 2000

Figure 72: Nominee accounts now dominate the stock broking landscape

Figure 73: The South East continues to have the highest proportion of households owning equities

Figure 74: 24% of UK adults aged between 55 and 64 have equity holdings

Figure 75: 3% more of UK males, on average, hold shares than women, 2003

Figure 76: Share ownership has fallen across all income bands since 2002

Figure 77: The total value of UK retail savings and investments is expected to reach GBP2.0trn by 2009

Figure 78: Unit trusts and OEICs are expected to grow fastest over the next five years

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