Savings Map of Britain:

Transcription

1 Savings Map of Britain: A Snapshot of the State of the Nation s Savings February 2012

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3 Contents Foreword Executive Summary 1. Britain s Savings 2. Regular Savings 3. Savings Trends Savings Intentions Conclusions List of Tables & Graphs Figure 1: Average British Savings Portfolio Figure 2: Savings Pot by Age Group Figure 3: Savings Map of Britain Figure 4: Regular Savings by Age Group Figure 5: Regular Savings Map of Britain Figure 6: Savings Habits in 2011 Figure 7: Savings Habits in 2011 by Age Group Figure 8: Savings Intentions in 2012 Figure 9: Savings Intentions by Age Group Figure 10: Reasons for Savings Intention in 2012 Figure 11: Reasons for Savings Intentions in 2012 by Age Group Savings Map of Britain I February

4 Foreword Britain s economy struggled to recover in 2011 and the country is now teetering on the edge of a double-dip recession, with inflation high above its oicial target and unemployment rising. Against this uncertain backdrop, Britons are continuing to feel the acute strain on their finances. This report reveals how continued economic instability has impacted the savings habits of UK savers. It uncovers how much the average Briton has in savings, how their portfolio is made up and what their savings habits have been in 2011, as well as looking at their savings intentions for the coming year. In 2011, several factors may have aected savings habits in Great Britain: Rising inflation; CPI inflation did not fall below 4.0% in 2011, which put it continually more than 2.0% above the Government s target. It peaked at 5.2% in September. Low interest rates; the Bank of England has held the base rate at 0.5% for 34 consecutive months. While interest rates on savings products have risen slightly this year, they still remain significantly lower than in previous years. Rising unemployment; the number of unemployed people is currently at its highest level since 1994 at 2.64 million. Lower disposable income; the latest ONS data shows that earnings were just 1.2% higher in 2011 than in 2010 at a time when annual inflation reached 4.8%, meaning that income is not rising in line with inflation and instead consumers are 3.6% out of pocket in real terms. This report from HSBC provides an up to the minute picture of Britain s savings and reveals the disparity in savings habits and intentions between genders, generations and regions. Bruno Genovese, Head of Savings at HSBC, comments: 2011 was a tough year for savers given the financial climate, but it is positive to see the substantial eort made by consumers to save in spite of this. While this year is also likely to prove a challenge for British savers, intentions to save remain high with people aware of the need to build up a savings cushion in case of a rainy day or to achieve their long and short term goals. These findings suggest that Brits will save where they can aord to in All figures, unless otherwise stated, are from Opinion Matters, in research undertaken on behalf of HSBC. The fieldwork was carried out online between 26 th November and 9 th December 2011, among a representative sample of 2002 people in the UK over the age of Savings Map of Britain I February 2012

5 Executive Summary HSBC, one of the UK s leading savings providers, has conducted research into the state of British savings and found that:- The average British savings and investments portfolio* is worth 17,875-61% of the average gross annual household income. Seven in ten people (71%) have some savings and 29% currently have no savings. British savers can be divided into three distinct, comparably sized groups: Successful savers - Just over a third (35%) boosted their savings balances in 2011, saving more than they withdrew (25% of the whole population). Struggling savers - a third (33%) withdrew more than they paid in to their savings pot (23% of the whole population). Static savers - the remaining 32% are neutral, saving as much as they withdrew or unsure whether their balance has gone up or down (23% of the whole population). The average British savings portfolio was slightly more diverse in 2011 than in Britons still favour a deposit based savings account with a bank or building society. Sixty-five per cent of people have a deposit based account and 46% of the value of the average savings pot is held in this format. Almost a quarter (23%) have equities and 19% have savings held in bonds. Generally, men save more than women, and Londoners and those from the South East save more than any other region. The young were the most likely to save more than they withdrew in However, the amount saved regularly by the age group ( 111) was 143 lower than the amount saved regularly by those over 55 ( 254). This dierence in regular savings between the ages has increased by 64% since British people have positive intentions for their savings over the next year, with the majority (60%) of people planning to save more or at least as much as they did in *Where the terms savings or savings portfolios are mentioned throughout this report, they refer to the various forms of savings and investments that Britons hold. Savings Map of Britain I February

6 1 Britain s Savings The average Briton has 17,875 in savings and investments. This is the equivalent of 61% of the average gross annual household income or just over seven months income. Seven in ten Britons (71%) have some form of savings or investments. Brits prefer banks and building societies but are prepared to diversify British savers continue to prefer to keep their savings in deposit based accounts with a bank or building society. Sixty-five per cent have this type of account, suggesting that, on the whole, they value the security of holding their money in a low risk traditional format. However, Brits are willing to diversify to improve their returns. Almost a quarter (23%) have some form of equity investment such as shares and 19% have savings held in bonds. Just 8% of Britons have savings in alternative asset classes and 7% have savings oset from their mortgage. By value, the largest portion (46%) of the mean average savings pot is held in deposit based savings (see fig 1), with over half (54%) of the portfolio value coming from other forms of savings and investments. Seventeen per cent is invested in alternative asset classes, a further 17% in bonds and 16% in equities such as company shares. Just four per cent is held in oset savings. The make up of the mean average savings portfolio in Britain is currently as follows: Figure 1: Make up of the Average British Savings Portfolio by Value 17% 17% 46% f f f f f 8,401 deposit based savings 2,994 in alternative asset classes 2,988 bonds e.g. gilts 2,776 equities e.g. stocks & shares ISAs 715 oset savings* 16% 4% Deposit Savings Oset savings Equities Bonds Alternative asset classes *Savings that are held in an account linked to a mortgage and oset against the mortgage balance to reduce the mortgage interest paid. 6 Savings Map of Britain I February 2012

7 Men put away more than women On average, men have almost 13,000 more than women in their savings pot, with 24,693 saved up compared to 11,971 for women. In terms of the proportion of their income held in savings, men also have far more set aside then women. Men have 77% or 9.3 months annual income in savings while women have just 44%, the equivalent of 5.3 months annual salary. However, the make-up of men and women s portfolios is relatively similar; more so than in 2010, when women were more risk averse. Women have slightly more in deposit based accounts than men (49% vs. 46%) with men holding more in equities than women (18% compared to 12%). Savings increase with age The amount held in savings and the savings to income ratio naturally increases with age (see fig 2) those aged have 4,048 in savings (22% annual average income) while those aged 55 and over have 30,356 in savings (115% average annual income). There is a slight dip in savings to income ratio for those aged 35 to 44. Figure 2: Savings Pot by Age Group Age group Amount in savings Savings: Annual Income ratio No. months annual salary in savings ,048 22% ,103 27% ,087 21% ,305 53% , % 13.8 The South East and the Capital lead the savings charge (see fig 3) People from the South East and Londoners have the highest amount in savings ( 21,324 and 21,186). However, the highest savings to income ratio is to be found in the South West (76%). People in Yorkshire have the lowest savings of any region ( 12,126) as well as the lowest savings to income ratio at 40%. Those in the South West have the most diverse portfolio with 40% in deposit based savings, 22% in equities, 18% in bonds, 17% in alternative asset classes and 2% oset against mortgages. In comparison those in the North East have spread their money around the least, holding 62% in deposit based savings accounts, 31% in bonds, 5% in equities, 1% in oset mortgages and 1% in alternative asset classes. Savings Map of Britain I February

8 Figure 3: Savings Map of Britain (% pot by value) Scotland Average Savings Pot 20,131 UK Deposit based 50% Equities 16% Average Savings Pot 17,875 Bonds 17% Deposit based 47% Oset savings 4% Equities 16% Alternative asset Classes 13% Bonds 17% Savings: Income Ratio 71% Oset savings 4% Alternative asset classes 17% North West Savings: Income Ratio 61% Average Savings Pot 16,920 Deposit based 44% Equities 18% Bonds 19% Oset savings 4% Alternative asset Classes 15% Savings: Income Ratio 64% North East Average Savings Pot 12,712 Deposit based 62% Equities 5% Bonds 31% Oset savings 1% Alternative asset classes 1% Savings: Income Ratio 47% Yorkshire Average Savings Pot 12,126 Deposit based 47% Equities 16% Bonds 21% Oset savings 6% Alternative asset classes 9% Savings: Income Ratio 40% Wales Average Savings Pot 15,651 Deposit based 43% Equities 22% Bonds 11% Oset savings 0% Alternative asset classes 17% Savings: Income Ratio 76% Midlands Average Savings Pot 15,234 Deposit based 51% Equities 13% Bonds 18% Oset savings 4% Alternative asset classes 14% Saving: Income Ratio 54% East of England Average Savings Pot 21,324 Deposit based 50% Equities 14% Bonds 10% Oset savings 3% Alternative asset classes 24% Savings: Income Ratio 62.5% South West Average Savings Pot 20,768 Deposit based 40% Equities 22% Bonds 18% Oset savings 2% Alternative asset classes 17% Savings: Income Ratio 76% London Average Savings Pot 21,186 Deposit based 45% Equities 13% Bonds 15% Oset savings 7% Alternative asset classes 20% Savings: Income Ratio 58% South East Average Savings Pot 21,324 Deposit based 50% Equities 14% Bonds 10% Oset savings 3% Alternative asset classes 24% Savings: Income Ratio 62.5% 8 Savings Map of Britain I February 2012

9 2 Regular Savings The majority of Britons save, but this is down 12% to 71% from 83% in 2010, with 29% saying they never save. Twenty eight per cent say they save regularly while a further 43% say they make ad hoc additions to their savings accounts throughout the year. Those who do save regularly set aside an average of 237 into their savings account each month compared to 232 in Men save more Almost the same proportion of men (29%) and women (27%) say they save regularly, as well as making ad hoc additions to their savings pots (45% vs. 43%). However, on average men put aside a much higher amount of money than women each month; 277 compared to 200. Slightly more women than men say they never save (30% vs. 26%). Regional findings (see fig 5) People in the North East are most likely to save regularly (36%) while those in the South West and Midlands are least likely (24%). The Scots are most likely to make ad hoc additions to their savings (49%) while those in the North West and North East are least likely (40%). Among regular savers, Londoners and those in the South East make the highest monthly contribution to their savings pot ( 338 and 337) while those in Wales add the smallest monthly amount ( 166). Over a third (35%) of people in the North West say they never save. Regular savings through the generations (see fig 4) Those aged are most likely to save regularly (32%) while those aged over 55 are least likely (26%). The 16-24s are most likely to make ad hoc additions to their savings (50%). For those who do save regularly, those aged over 55 save the most each month at 254 while those aged save the least at 111 a gap of 143. This gap in regular savings is 64% higher than in 2010 when the youngest group saved 160, which was 81 less than the over 55s. Figure 4: Regular Savings by Age Group Age group % Save Regularly Average Regular Monthly Savings* % 111 7% % % % 223 6% % 245 9% % 254 6% *Of those who save regularly % Monthly Income Saved Savings Map of Britain I February

10 Figure 5: Regular Savings Map of Britain 2011 UK % Who Regularly Save 28% Average Monthly Savings 237 % Gross Income Saved each Month 10% Scotland % Who Regularly Save 27% Average Monthly Savings 192 % Salary Saved each Month 8% North East % Who Regularly Save 36% Average Monthly Savings 173 % Salary Saved each Month 8% North West % Who Regularly Save 25% Average Monthly Savings 243 % Salary Saved each Month 11% Yorkshire % Who Regularly Save 27% Average Monthly Savings 177 Midlands % Salary Saved each Month 7% % Who Regularly Save 24% Average Monthly Savings 198 % Gross Income Saved each Month 8% East of England % Who Regularly Save 29% Wales Average Monthly Savings 225 % Who Regularly Save 28% % Salary Saved each Month 10% Average Monthly Savings 166 % Salary Saved each Month 9% South West % Who Regularly Save 24% Average Monthly Savings 169 % Salary Saved each Month 7% London % Who Regularly Save 30% Average Monthly Savings 338 % Salary Saved each Month 11% South East % Who Regularly Save 32% Average Monthly Savings 337 % Salary Saved each Month 12% 10 Savings Map of Britain I February 2012

11 3 Savings Trends in 2011 Trends for investing and withdrawing money suggest that Britons were a little more successful in increasing their overall savings balance in 2011 than in 2010 (see fig 6). Of those 71% that did save, 35% (the highest proportion) deposited more than they withdrew into their savings last year compared to 32% in This 35% is made up of 18% who say they saved a lot more than they withdrew and 17% who say they invested a little more then they withdrew. However, the nation s savers are divided. A third (33%) say they withdrew more than they invested in 2011; 21% say they withdrew a lot more than they saved while 12% say they withdrew a little more then they saved. Sixteen per cent were treading water, saying they took as much out of their savings as they deposited in the first place. Men were most likely to invest more than they withdrew from savings in 2011, in a reverse on their 2010 savings habits, when the largest group withdrew more than they invested. Thirty nine per cent of men compared to 32% of women said they saved more than they withdrew. Women were most likely to withdraw more than they invested (36%). Figure 6: Savings Habits in % 12% 18% 17% Saved a lot more than withdrew Saved a little more than withdrew Saved as much as withdrew Don t know Withdrew a lot more than I saved Withdrew a little more than I saved 16% 16% Savings Map of Britain I February

12 Families dip into their savings (see fig 7) The year olds, typically the age group with children of school age were the only group that were more likely to say they withdrew more than they invested than vice versa in 2011 (34% vs. 31%). They were also the group least likely to save more than they withdrew (31%) whereas those aged were the most likely (41%). The older people get, the more likely they are to say they withdrew more than they saved, with 36% of the over 55s saying this compared to 18% of 16-24s. This pattern reflects a reduction of assets in retirement and a build up of wealth among the younger age groups. Figure 7: Savings Habits by Age in 2011 Percentage 30% 25% 20% 15% 10% I saved a lot more than I withdrew from my savings pot (25% or more) I saved a little more than I withdrew from my savings pot (less than 25%) I saved as much as I withdrew last year I withdrew a little more from my savings pot than I invested (less than 25%) I withdrew a lot more from my savings pot than I invested (25% or more) 5% 0% Age Age Age Age Age 55+ Age Groups 12 Savings Map of Britain I February 2012

13 4 Savings Intentions 2012 Although 29% of people did not save at all in 2011 and a third of those who did struggled to put in more than they took out, intentions to save in 2012 remain high (see fig 8). Thirty six per cent of respondents plan to save more in the next 12 months than they did in 2011; 16% say they plan to save a lot more and 20% will save a little more. Just under a quarter (24%) say they plan to save the same as they did last year in 2012, while 17% expect to save less over the next 12 months. In today s uncertain environment 23% cannot say what they will be able to save at this stage. Figure 8: Savings Intentions in % 16% I plan to save a lot more I plan to save a little more I expect to save a lot less I expect to save a little less I plan to save about the same Don t know 20% 24% 7% 10% Savings Map of Britain I February

14 Young savers lose momentum (see fig 9) Whereas in 2010 the younger generation had the best savings intentions and these diminished with age, the reverse is now true, possibly as a result of the sustained high cost of living, frozen salaries, and a rise in part time workers and unemployment. Those aged have the lowest intentions to save with just a fifth (19%) saying they will save more in 2012 compared to 35% of 25 to 34 year olds and 45% of over 55s. Conversely, only a quarter of over 55 year olds expect to save less in 2012, compared to 56% of 16 to 24 year olds. Figure 9: Savings Intentions by Age in % Percentages 30% 25% 20% 15% 10% I plan to save a lot more than last year (25% or more) I plan to save a little more than last year (less than 25%) I plan to save about the same as I did last year I expect to save a little less than last year (less than 25%) I expect to save a lot less than last year (25% or more) 5% 0% Age Age Age Age Age 55+ Age Groups 14 Savings Map of Britain I February 2012

15 4.1 Regular Savings Intentions The outlook for regular savings in 2012 is slightly more volatile than that for Less than half (45%) of regular savers expect the amount they put away regularly to stay the same over the next twelve months and 20% are not sure how much they will be able to save or expect the amount will vary. However, 22% of regular savers expect the amount they save to increase over the next 12 months compared to only 15% of those asked last year. Gender dierences Men are more likely than women to increase their regular savings in 2012 (24% vs. 20%) and this gap has widened since last year. Women are more uncertain than men as to how their savings will change in the next 12 months (19% vs. 11%). Generational dierences The older age groups are more likely to expect to maintain their regular savings at their current levels; 55% of over 55s believe this compared to 19% of 16 to 24 year olds. The expectation of increasing the amount saved regularly decreases with age. 38% of year olds expect to increase their regular savings in 2011 compared to 13% of over 55 year olds. However year olds are also the most likely to expect their savings to decrease (29%). Regional dierences Of the regions, Yorkshire has the most people planning to increase their regular savings over the next 12 months. 39% say they will increase the amount the put away each month, compared to just 10% of those in the North East. The North East has the highest proportion of people who expect their regular savings to decrease over the course of 2012 (23%) while Wales has the lowest proportion at just 4%. Savings Map of Britain I February

16 4.2 Reasons for Saving In terms of what people are saving for, long term goals are now losing out; just over one in ten (12%) intends to save more in the next year to contribute to their long term goals e.g. retirement or property, compared to one in five last year. Of those who intend to save more for a variety of reasons, 21% intend to save more to provide a rainy day fund; 16% intend to save more towards their short term goals such as a car or holiday and just 12% will save for long term goals. There is also a range of reasons why people are planning to save less over the next 12 months (see fig 10); 16% intend to save less as they need more money to pay for their everyday living costs, 4% say they plan to save less as interest rates are currently so low and a further 3% say they intend to save less as they feel they may as well spend it while they have it. On the whole, men and women plan to save for similar reasons in Figure 10: Reasons for Saving Intentions in 2012 Save Less 16% 4% 21% I intend to save more to provide a rainy day fund I intend to save more to contribute towards my longer term financial goals (e.g. retirement or investing in a second property) I intend to save more to contribute towards my short term financial goals (e.g. buying a car or for a holiday) I intend to save less as I may as well spend it now while I have it I intend to save less as I need more for everyday living costs I intend to save less as interest rates are so low currently 4% 16% 14% Save More 16 Savings Map of Britain I February 2012

17 All but the young saving for a rainy day Younger savers, year olds, are the only group that have not prioritised saving for a rainy day (see fig 11), with only 14% planning to set aside money for this reason. Most (34%) are saving for short term goals instead, followed by longer term financial goals (15%). The older age groups appear to be more aware of the prevailing financial climate when making their savings plans, as they are all prioritising saving for a rainy day fund. The over 55s are the most likely to have reasons to save less next year (28%), while a fifth of 45 to 54 year olds are planning to save less as they need more money for every day living costs. Figure 11: Reasons for Savings Intentions in 2012 by Age Group 16 to to to to Save more - Long term financial goals 15% 19% 13% 14% 11% Save more - Short term financial goals 34% 21% 18% 8% 16% Save more - Rainy day 14% 27% 24% 21% 16% Save less - Everyday living costs 6% 11% 16% 20% 17% Save less - Spend it now 6% 2% 1% 2% 5% Save less - Low interest rates 0% 1% 2% 3% 6% Regional Findings f People in Yorkshire are the most likely to save for a rainy day, with a quarter prioritising this contingency fund compared to only 16% of people from the North East. f f f Yorkshire is also one of the regions with the highest proportion of people who will be using their money for everyday living costs rather than saving it (19%) and one of the only regions where more people are saving for long term rather than short term goals (17% vs. 14%), which suggests that they are feeling the pinch and realise the importance of saving for a secure future. Londoners are the most committed to saving for their long term financial goals (19%), whereas those in the East are most likely to save for short term goals (21%). Those from the South East say they are most likely to save less over the year to meet everyday living costs (20%), potentially due to rising rents and transport costs. Savings Map of Britain I February

18 5 Conclusions In conclusion, while the current financial and economic climate has driven the majority of Britons to try to save in 2011, the nation is divided into net positive and net negative savers, as some need the money for everyday spending. Of those Britons that do save, just over a third (35%) saved more than they withdrew in 2011, a third (33%) withdrew more than they invested and just under a third (32%) were neutral, investing as much as they withdrew. While low risk deposit based savings are most popular, portfolios are more diverse than in The largest group of Brits (21%) are saving for a rainy day, with long term goals now losing out. However, Brits continue to be optimistic about their savings intentions for 2012, with 36% planning to save more this year. In terms of the sexes, men have a significantly higher savings to income ratio than women (77% vs. 44%) and were able to invest more into their savings than they withdrew. Looking to 2012, men are slightly more likely to increase the amount they save than women, whereas a greater proportion of women are uncertain as to how their savings habits will change over the next twelve months. The amount held in savings naturally increases with age and younger savers were most likely to save more than they withdrew in 2011 as they build up their assets. This said, the monthly amount saved regularly by year olds dropped by 49 to 111, possibly as a result of unemployment or more disposable income being needed for everyday expenses. The high cost of living may also be responsible for younger savers being less likely to expect to save more in 2012 compared to the older generation, in a reverse on last year. The year olds are the only age group not prioritising a rainy day fund when saving, putting short term goals first instead. Across the UK, Londoners and those in the South East have the highest amount in savings and make the highest monthly contributions to their savings pots, although the highest savings to income ratio is to be found in the South West at 76%. People in the North East are most likely to save regularly in contrast to those in the North West, over a third (35%) of who say they never save. People in Yorkshire are the most likely to save for a rainy day, with a quarter prioritising this contingency fund, whereas Londoners appear to have a more optimistic outlook and are the most committed to saving for their long term financial goals (19%). 18 Savings Map of Britain I February 2012

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20 For further information please contact: Melissa Jobson I I melissa.jobson@hsbc.com Louise Weaver / Hugh Murphy I I l.weaver@wriglesworth.com