Savings Metrics: Consumer Attitudes towards and Behaviour in the UK Savings Market

Table of Contents

0.0 EXECUTIVE SUMMARY

• No notice interest-bearing deposit and savings accounts are held by over 50% of consumers
• …. although a significant percentage have no short to medium-term savings whatsoever
• …. with the proportion lacking pension or retirement savings increasing to almost twice this level
• On average, a majority of the wealth of consumers in the UK is tied up in property ownership
• Penetration rates for different savings products vary radically by demographic and life stage
• Over a third of consumers claim to save in a disciplined manner and on a regular basis
• … although only a minority appear to take any external advice when it comes to savings decisions
• On-line financial aggregators and brokers are achieving an increasing profile among consumers
• A clear majority of cons. agree that providing for retirement is an important motive for saving
• … although many, especially those in younger age groups, face other more pressing priorities
• Cons. display high levels of insecurity with regards to the adequacy of their retirement saving
• … a degree of concern that diminishes only slightly among those aged between 55 and 64
• 7% of consumers believe that they will need savings in excess of £1 million in today' s money
• Most consumers are not necessarily averse to the concept of compulsory retirement savings
• … although many appear to be pinning too much on the future value of their state pension
• … and property ownership is beginning to rival conventional pensions as a retire. saving option
• Consumers display a relatively high willingness to continue part-time work following retirement
• The results of the research point to fast-changing consumer savings behaviour in the UK
• … with increasing prop. to invest in property throwing up both challenges and opportunities

1.0 INTRODUCTION

• Research rationale
• The study offers unique data concerning penetration rates for 23 different savings products
• … as well as analysing cons. propensity to acquire the products according to their life stage
• … and delivering a number of original insights into their approach to retire. saving, in particular
• Research sample
• Finaccord
• Savings Metrics and other consumer-focused studies
• UK affinity and partnership marketing publications
• IPT / Tpoll

2.0 SAVINGS OVERVIEW

• Introduction
• Consumer holdings of residential mortgages and non-mortgage debt
• Residential mortgages
• Over one quarter of survey respondents own property outright with no outstanding mortgage
• Among respondents with a mortgage, the average outstanding debit is in excess of £80,000
• Non-mortgage debt
• Just over a half of the 1,550 survey participants hold some form of non-mortgage debt
• … with almost 20% of these burdened with unpaid loans in excess of £20,000
• Consumer holdings of savings products
• Short-term and medium-term savings products
• Only three types of savings product are held by in excess of a quarter of consumers
• … with the figures varying only a little when calculated on an adjusted basis
• Over a quarter of respondents hold short-term and medium-term savings in excess of £20,000
• … with the average value of holdings growing in line with increasing age and household income
• Pension and retirement savings products
• Well over 40% of respondents belong either to a company or occupational pension scheme
• Individual and group SIPPs, on the other hand, remain very much a niche market
• 44% of respondents state that they hold no funds whatsoever in pension or retirement products
• … and a further significant percentage report savings of below £20,000 allocated to this category
• Average retirement savings held by respondents aged between 55 and 64 are just £40,980
• Number of relationships with companies offering savings products
• Over 10% of respondents maintain relationships with five or more providers of savings products
• Property ownership (including buy-to-let)
• A small percentage of respondents own either a second home or property acquired for rental
• 25% of respondents own property with a gross value in excess of £300,000
• Sources of information and advice influencing savings decisions
• Consumer awareness of on-line financial aggregators and brokers continues to rise
• Degree of self-direction when making savings decisions
• A high proportion of respondents claim to be totally self-directed when it comes to savings
• … although this percentage declines somewhat in line with increasing household income
• Importance of general motives for saving
• Well over a half of respondents agree on the importance of saving for retirement generally
• … although those aged under 45, in particular, often have other more pressing needs for saving
• Degree of discipline in consumer savings behaviour
• Slightly over one third of consumers can be characterised as disciplined savers
• … although this percentage rises sharply for those with a household income of £50,000 or more

3.0 RETIREMENT SAVINGS

• Introduction
• Consumer confidence with respect to provision for retirement savings
• Well over a half of consumers lack confidence that they will save enough for their retirement
• … and uncertainty remains high even among respondents aged between 55 and 64
• … although the outlook appears to be rosier for those with a household income above £40,000
• Consumer perceptions of savings sufficient to provide for retirement
• 7.0% of consumers believe that they will need to save £1 million in advance of their retirement
• … although the majority of consumers probably under-estimate the amount that they will need
• The expectations of retired respondents are more modest than those of individuals still working
• Attitudes of consumers towards idea of compulsory saving for retirement
• A clear majority of consumers are open to the concept of compulsory retirement saving
• Awareness of consumers of plans for a National Pension Savings Scheme
• … although awareness levels of the government' s plans for the NPSS remain low
• Importance of various income sources as a means of funding retirement
• In general, consumer expectations of the state pension appear to be out of line with reality
• Property owned ranks almost equally with financial products designed specifically for retirement
• Consumers who have retired already appear to be even more reliant on the state pension
• Younger consumers appear to be considering alternative means of retirement funding
• Expectations of consumers with respect to their likely age of retirement
• On average, the retirement age planned by consumers is not in line with government proposals
• Willingness of consumers to continue part-time work following retirement
• ' Work until you drop' - a possible scenario for old age in the UK?
• Consumer purchasing patterns for at-retirement products
• Traditional pension annuities seem destined to remain the most popular at-retirement choice
• Over two thirds of retired respondents are funding their retirement through a traditional annuity
• Consumer holdings of products designed to minimize inheritance tax
• A significant minority of respondents hold a product designed to minimize inheritance tax

4.0 SEGMENT ANALYSIS

• Introduction
• Short and medium-term savings products
• Interest-bearing deposits or savings accounts for which no notice is required
• Interest-bearing deposits or savings accounts for which notice is required
• National Savings & Investments bonds or certificates (including premium bonds)
• Cash ISAs
• Equity ISAs
• OEICs or unit trusts
• Investment trusts or venture capital trusts
• Direct stock market (equity) investment
• Direct investment in corporate or government bonds
• Bank and building society investment bonds
• Guaranteed equity and property bonds (excluding NS&I)
• Life company investment bonds
• Life company endowment policies
• Child Trust Funds
• Tax-free friendly society savings plans
• Pension and retirement savings products
• Individual personal pensions
• Individual stakeholder pensions
• Individual SIPPs (self-invested personal pensions)
• Group personal or executive pensions
• Group stakeholder pensions
• Group SIPPs (self-invested personal pensions)
• Company and occupational pension schemes
• Savings products designed to minimize inheritance tax

GRAPHICS / TABLES

• Sample breakdown by age group, household income band and geographical location
• Sample breakdown by number of children, employment status and retirement status
• Home ownership and holdings of residential mortgage debt among consumers in the UK, 2007
• Consumer holdings of residential mortgage debt in the UK split by value of outstanding debt, 2007
• Holdings of non-mortgage debt among consumers in the UK, 2007
• Consumer holdings of non-mortgage debt in the UK split by value of outstanding debt, 2007
• Consumer holdings of short-term and medium-term savings products in the UK, 2007 (unadjusted)
• Consumer holdings of short-term and medium-term savings products in the UK, 2007 (adjusted)
• Consumer holdings of short-term and medium-term savings products in the UK split by value of savings, 2007
• Cons. holdings of short and med.-term savings prods. split by value of savings, 2007 (seg. by age group - data)
• Cons. holds. of short and med.-term savs. prods. split by value of savs., 2007 (seg. by house. inc. group - data)
• Overall consumer holdings of pension and retirement savings products in the UK, 2007 (unadjusted)
• Overall consumer holdings of pension and retirement savings products in the UK, 2007 (adjusted)
• Consumer holdings of pension and retirement savings products in the UK split by value of savings, 2007
• Cons. holdings of pens. and retirement savings prods. split by value of savings, 2007 (seg. by age group - data)
• Cons. holds. of pens. and retirement savs. prods. split by value of savs., 2007 (seg. by house. inc. group - data)
• Number of relationships with companies offering savings products held by consumers in the UK, 2007
• Ownership of homes and other residential property (including buy-to-let) of consumers in the UK, 2007
• Consumer ownership of property in the UK (including buy-to-let) segmented by value of property, 2007
• Importance of sources of information and advice in influencing the savings decisions of cons. in the UK, 2007
• Importance of sources of information and advice in influencing the savs. decs. of cons. in the UK, 2007 (data)
• Degree of self-direction shown by consumers making more complicated savings decisions in the UK, 2007
• Deg. of self-direction shown by cons. making savs. decs. in the UK, 2007 (segmentation by age group - data)
• Deg. of s-d. shown by cons. making savs. decs. in the UK, 2007 (segmentation by house. inc. group - data)
• Importance of general motives for saving of consumers in the UK, 2007
• Importance of general motives for saving of consumers in the UK, 2007 (data)
• Importance of general motives for saving of consumers in the UK, 2007 - answers for resps. aged under 45
• Importance of general motives for saving of cons. in the UK, 2007- answers for resps. aged under 45 (data)
• Degree of discipline shown in their savings behaviour by consumers in the UK, 2007
• Degree of discipline shown in their savings behaviour by cons. in the UK, 2007 (segment. by age group - data)
• Degree of disc. shown in their savs. behaviour by cons. in the UK, 2007 (segment. by house. inc. group - data)
• Confidence of having saved sufficient funds to provide for retirement of consumers in the UK, 2007
• Conf. of having saved suff. funds to provide for retire. of cons. in the UK, 2007 (segment. by age group - data)
• Conf. of having saved suff. funds to prov. for retire. of cons. in UK, 2007 (segment. by house. inc. group - data)
• Value of savs. perceived to be suff. by cons. to adequately fund retire., 2007 - answers for resps. not yet retired
• Value of savs. perceived to be suff. by cons. to adequately fund retire., 2007 - answers for retired resps
• Attitudes towards idea of compulsory saving for retirement of consumers in the UK, 2007
• Awareness of government plans for a National Pension Savings Scheme of consumers in the UK, 2007
• Perceptions of cons. of various inc. sources as means of funding retire., 2007 - answers for resps. not yet retired
• Perc. of cons. of various inc. sources as means of funding retire., 2007 - answers for resps. not yet retired (data)
• Perceptions of cons. of various inc. sources as means of funding retire., 2007 - answers for retired resps
• Perc. of cons. of various inc. sources as means of funding retire., 2007 - answers for retired resps. (data)
• Perceptions of cons. of various income sources as the most important means of funding retire. in the UK, 2007
• Perc. of cons. of various inc. sources as the most important means of funding retire. in the UK, 2007 (data)
• Expectations of consumers with respect to their likely age of retirement in the UK, 2007
• Willingness of consumers to continue part-time work following retirement in the UK, 2007
• Likelihood to purchase various at-retirement products of consumers in the UK, 2007
• Likelihood to purchase various at-retirement products of consumers in the UK, 2007 (data)
• Actual purchase of various at-retirement products of retired consumers in the UK, 2007
• Consumer holdings of savings products designed to minimize inheritance tax in the UK, 2007
• Interest-bearing deposit or savings accounts for which no notice is required: penetration by cust. segment, 2007
• Interest-bearing deposit or savings accounts for which notice is required: penetration by cust. segment, 2007
• National Savings & Investments bonds or certificates (inc. premium bonds): penetration by cust. seg. 2007
• Cash ISAs: penetration by customer segment, 2007
• Equity ISAs: penetration by customer segment, 2007
• OEICs or unit trusts: penetration by customer segment, 2007
• Investment trusts or venture capital trusts: penetration by customer segment, 2007
• Direct stock market (equity) investment: penetration by customer segment, 2007
• Direct investment in corporate or government bonds: penetration by customer segment, 2007
• Bank or building society investment bonds: penetration by customer segment, 2007
• Guaranteed equity or property bonds (excluding National Savings & Investments): pen. by cust. seg., 2007
• Life company investment bonds: penetration by customer segment, 2007
• Life company endowment policies: penetration by customer segment, 2007
• Child Trust Funds: penetration by customer segment, 2007
• Tax-free friendly society savings plans: penetration by customer segment, 2007
• Individual personal pensions: penetration by customer segment, 2007
• Individual stakeholder pensions: penetration by customer segment, 2007
• Individual SIPPs (self-invested personal pensions): penetration by customer segment, 2007
• Group personal or executive pensions: penetration by customer segment, 2007
• Group stakeholder pensions: penetration by customer segment, 2007
• Group SIPPs (self-invested personal pensions): penetration by customer segment, 2007
• Company or occupational pension schemes: penetration by customer segment, 2007
• Savings products designed to minimize inheritance tax: penetration by customer segment, 2007