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Savings Map of Britain:

A Snapshot of the State of the Nation’s Savings

February 2012

Foreword

Executive Summary

1. Britain’s Savings

2. Regular Savings

3. Savings Trends 2011

4. Savings Intentions 2012

5. Conclusions

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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

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Contents

Savings Map of Britain I February 2012 3

Savings Map of Britain I February 20124

ForewordBritain’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 official 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 affected savings habits in Great Britain:

f 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.

f 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.

f Rising unemployment; the number of unemployed people is currently at its highest level since 1994 at 2.64 million.

f 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.

All figures, unless otherwise stated, are from Opinion Matters, in research undertaken on behalf of

HSBC. The fieldwork was carried out online between 26th November and 9th December 2011, among a

representative sample of 2002 people in the UK over the age of 16.

“2011 was a tough year for savers given the financial climate, but it is positive to see the

substantial effort 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 afford to in 2012.”

Bruno Genovese,

Head of Savings at HSBC, comments:

f The average British savings and investments portfolio* is worth £17,875 - 61% of the average gross annual household income.

f Seven in ten people (71%) have some savings and 29% currently have no savings.

f 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).

f The average British savings portfolio was slightly more diverse in 2011 than in 2010.

f 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.

f Generally, men save more than women, and Londoners and those from the South East save more than any other region.

f The young were the most likely to save more than they withdrew in 2011. However, the amount saved regularly by the 16-24 age group (£111) was £143 lower than the amount saved regularly by those over 55 (£254). This difference in regular savings between the ages has increased by 64% since 2010.

f 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 2011.

Executive Summary

*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.

HSBC, one of the UK’s leading savings providers, has conducted research into the state of British savings and found that:-



Britain’s Savings1The 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 diversifyBritish savers continue to prefer to keep their savings in deposit based accounts with a bank or building society. Sixty-fi ve 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 offset from their mortgage.

By value, the largest portion (46%) of the mean average savings pot is held in deposit based savings (see fi g 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 offset savings.

The make up of the mean average savings portfolio in Britain is currently as follows:

f £8,401 deposit based savings

f £2,994 in alternative asset classes

f £2,988 bonds e.g. gilts

f £2,776 equities e.g. stocks & shares ISAs

f £715 offset savings*

Figure 1: Make up of the Average

British Savings Portfolio by Value

Deposit Savings

Offset savings

Equities

Bonds

Alternative asset classes

17%

46%

4%16%

17%

*Savings that are held in an account linked to a mortgage and offset against the mortgage balance to reduce the mortgage interest paid.

Men put away more than womenOn 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 ageThe amount held in savings and the savings to income ratio naturally increases with age (see fig 2) – those aged 16-24 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.

The South East and the Capital lead the savings charge (see fig 3) f 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%).

f People in Yorkshire have the lowest savings of any region (£12,126) as well as the lowest savings to income ratio at 40%.

f 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% offset against mortgages.

f 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 offset mortgages and 1% in alternative asset classes.

Age group Amount in savings Savings: Annual Income ratioNo. months annual salary in savings

16-24 £4,048 22% 2.7

25-34 £8,103 27% 3.3

35-44 £9,087 21% 2.6

45-54 £17,305 53% 6.3

55+ £30,356 115% 13.8

Figure 2: Savings Pot by Age Group



Figure 3: Savings Map of Britain (% pot by value) Scotland

Average Savings Pot £20,131

Deposit based 50%

Equities 16%

Bonds 17%

Offset savings 4%

Alternative asset Classes 13%

Savings: Income Ratio 71%

Yorkshire


Deposit based 47%

Equities 16%

Bonds 21%

Offset savings 6%

Alternative asset classes 9%


North East


Deposit based 62%

Equities 5%

Bonds 31%

Offset savings 1%



North West


Deposit based 44%

Equities 18%

Bonds 19%

Offset savings 4%

Alternative asset Classes 15%


Midlands


Deposit based 51%

Equities 13%

Bonds 18%

Offset savings 4%


Saving: Income Ratio 54%

Wales


Deposit based 43%

Equities 22%

Bonds 11%

Offset savings 0%



South West


Deposit based 40%

Equities 22%

Bonds 18%

Offset savings 2%



East of England


Deposit based 50%

Equities 14%

Bonds 10%

Offset savings 3%


Savings: Income Ratio 62.5%

UK


Deposit based 47%

Equities 16%

Bonds 17%

Offset savings 4%



South East


Deposit based 50%

Equities 14%

Bonds 10%

Offset savings 3%


Savings: Income Ratio 62.5%

London


Deposit based 45%

Equities 13%

Bonds 15%

Offset savings 7%



Regular Savings2The 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 2010.

Men save moreAlmost 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%).

Regular savings through the generations (see fig 4)Those aged 25-34 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 16-24 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.

Regional findings (see fig 5) f People in the North East are most likely to save regularly (36%) while

those in the South West and Midlands are least likely (24%).

f 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%).

f 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).

f Over a third (35%) of people in the North West say they never save.

Age group % Save Regularly Average Regular Monthly Savings*

% Monthly Income Saved

16-24 28% £111 7%

25-34 32% £236 10%

35-44 28% £223 6%

45-54 27% £245 9%

55+ 26% £254 6%

Figure 4: Regular Savings by Age Group

*Of those who save regularly



Figure 5: Regular Savings Map of Britain 2011

Yorkshire

% Who Regularly Save 27%

Average Monthly Savings £177

% Salary Saved each Month 7%

East of England




UK



% Gross Income Saved each Month 10%

South East



% Salary Saved each Month 12%London




Scotland




North East




North West




Midlands



% Gross Income Saved each Month 8%

Wales




South West




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 fi g 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 2010. 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 fi rst 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%).

Savings Trends in 20113

Figure 6: Savings Habits in 2011

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

21%

12% 18%

17%

16%16%



Families dip into their savings (see fi g 7)The 35-44 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 16-24 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 refl ects a reduction of assets in retirement and a build up of wealth among the younger age groups.

Age 18-240%

5%

10%

15%

20%

25%

30%

Per

cent

age

Age 25-34

Age Groups

Age 35-44 Age 45-54 Age 55+

Figure 7: Savings Habits by Age in 2011

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)

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

16%

20%

10%7%

24%

23%

Figure 8: Savings Intentions in 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 fi g 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.

Savings Intentions 20124



Young savers lose momentum (see fi g 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 16-24 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.

Age 18-240%

5%

10%

15%

20%

25%

30%

35%

Per

cent

ages

Age 25-34

Age Groups

Age 35-44 Age 45-54 Age 55+

Figure 9: Savings Intentions by Age in 2012

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)

The outlook for regular savings in 2012 is slightly more volatile than that for 2011. 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 differences f Men are more likely than women to increase their regular savings in 2012 (24% vs. 20%) and this

gap has widened since last year.

f Women are more uncertain than men as to how their savings will change in the next 12 months (19% vs. 11%).

Generational differences f 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.

f The expectation of increasing the amount saved regularly decreases with age. 38% of 16-24 year olds expect to increase their regular savings in 2011 compared to 13% of over 55 year olds.

f However 16-24 year olds are also the most likely to expect their savings to decrease (29%).

Regional differences f 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.

f 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%.

Regular Savings Intentions4.1



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 fi ve 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 fi g 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 2012.

21%

14%

16%

4%

16%

4%

Figure 10: Reasons for Saving Intentions in 2012

Reasons for Saving4.2

I intend to save more to provide a ‘rainy day’ fund

I intend to save more to contribute towards my longer term fi nancial goals (e.g. retirement or investing in a second property)

I intend to save more to contribute towards my short term fi nancial 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

Save More

Save Less

All but the young saving for a rainy dayYounger savers, 16-24 year olds, are the only group that have not prioritised saving for a rainy day (see fi g 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 fi nancial goals (15%).

The older age groups appear to be more aware of the prevailing fi nancial 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 fi fth of 45 to 54 year olds are planning to save less as they need more money for every day living costs.

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 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.

f Londoners are the most committed to saving for their long term fi nancial goals (19%), whereas those in the East are most likely to save for short term goals (21%).

f 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.

16 to 24 25 to 34 35 to 44 45 to 54 55+

Save more - Long term fi nancial goals

15% 19% 13% 14% 11%

Save more - Short term fi nancial 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%

Figure 11: Reasons for Savings Intentions in 2012 by Age Group



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 2010. 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 16-24 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 16-24 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%).

Conclusions5

For further information please contact:

Melissa Jobson I 020 7992 1558 I [email protected]

Louise Weaver / Hugh Murphy I 020 7427 1400 I [email protected]

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