United Kingdom

Without a bank account

Graphs on this page:

Supporting information:

Key points

  • The proportion of low-income households without a bank account is much lower than a decade ago, from 20-25% in the late 1990s to 5% in 2008/09.  Most of the fall was in the three years from 2002/03 to 2005/06.
  • Because of this fall, the proportion of low-income households without a bank account is now not that much greater than the proportion of households on average incomes who are without a bank account: 5% compared with 3%.
  • The fall in the proportion of low-income households without a bank account largely coincided with the introduction of two new types of account, namely basic bank accounts and post office card accounts.  If, as some argue, post office card accounts should not be included as a proper account because of their limited functionality, the proportion of low-income households without an account rises to 11%.
  • Half of all households with a post office account only are in the poorest fifth of households, with most of the remainder in the second poorest fifth.  Although some 2% of households with above-average incomes have no account whatsoever, almost none have a post office account only.

Why this indicator was originally chosen

It is becoming increasingly important for people to have the benefits of modern financial services.  A range of other benefits and conveniences become available with access to even simple financial services.  For example, lack of a bank account can mean higher prices for basic utilities than those paying by either cheque or direct debit, labour market disadvantage (employers tend to expect to pay wages directly into accounts), and limited access to credit.

Definitions and data sources

The first graph shows the proportion of households without a bank, building society or any other kind of account.  The data is split to show households in the poorest fifth of the income distribution and for households on average incomes (middle fifth of the income distribution) separately.  Income is household disposable income, equivalised (adjusted) to take account of household composition and is measured after deducting housing costs.

As the first graph shows, the proportion of households without an account has fallen sharply in recent years.  This fall has largely coincided with the introduction of two new types of account, namely basic bank accounts and post office card accounts (POCAs).  Some people argue that these new types of account, particularly the post office card account, should not be considered to be true accounts as they have only limited functionality (e.g. to avoid the account going into overdraft, it does not allow direct debits to be set up).  In this context, the second graph shows, for differing levels of household income, the proportion of households with only a basic bank account or a post office card account.  Note that such an analysis was not possible for years prior to 2005/06.  Also note that the small number of households with both a basic bank account and a post office card account but no other accounts are included in the ‘basic bank account only’ category.

The data source for both graphs is the Family Resources Survey (FRS).  The data relates to Great Britain (FRS did not cover Northern Ireland prior to 2002/03).  As well as bank and building society accounts, the figures also count any savings or investment accounts as well as post office card accounts but do not include stocks and shares, premium bonds, gilts, Save As You Earn arrangements or Credit Unions.  It is important to note that the proportions in both graphs are proportions of households, not families or individuals (for both of which, the proportions would be higher).

Overall adequacy of the indicator: medium.  FRS is probably the most representative of the surveys that gather information on the extent to which people have bank and other types of account but the inclusion in recent years of people with post office card accounts only is arguably distorting the trends over time.

External links

Relevant 2007 Public Service Agreements

None directly relevant.

The numbers

Graph 1

Year Poorest households Households with average incomes
1994/95 23% 5%
1995/96 23% 5%
1996/97 24% 5%
1997/98 23% 5%
1998/99 22% 4%
1999/00 23% 4%
2000/01 22% 4%
2001/02 20% 4%
2002/03 19% 5%
2003/04 16% 4%
2004/05 9% 3%
2005/066% 3%
2006/077% 3%
2007/086% 3%
2008/095% 3%

Graph 2

Household income group No account Post Office Card Account only Basic bank account only
Poorest fifth6% 5% 5%
2nd4% 3% 3%
Households with average incomes3% 1% 1%
4th3% `% 1%
Richest fifth2% 0% 0%