8th December 2015
The watchdog is bringing in new rules to boost competition in the savings market and make it easier for customers to switch
From December 2016, firms will have to provide clear information on interest rates offered on cash savings products as well as clearly reminding consumers about changes in interest rates or the end of an introductory rate.
Financial Conduct Authority (FCA) has also published the first set of data on the lowest interest rates offered by 32 providers of easy access cash savings accounts and easy access cash ISAs.
The aim of this publication is to shine a light on the way those firms treat longstanding customers. The FCA will be publishing this information on a trial basis for 18 months at six-monthly intervals.
The findings reveal that:
– At least half of the providers in the sample offer a lowest interest rate of 0.10 or less on closed easy access cash savings accounts (that can be managed in branch)
– At least half of the providers in our sample offer a lowest interest rate of 0.50 or less on closed easy access cash ISAs (that can be managed in branch)
– £354 billion of the £700 billion cash savings is in easy access accounts (balances to end Dec 2013 from a sample of firms)
– A third of easy access money hasn’t moved for over five years
– The big four banks get away with paying lower interest rates as their customers like the convenience of managing everything in one place
Christopher Woolard, director of strategy and competition at the FCA, says: “With many savers never switching because they don’t think it will make a difference, our rules will help consumers get the information they need to shop around.
“In a good market, providers should be competing to offer the best possible deal and should a consumer wish to move accounts, they should be able to do so with the minimum of fuss.
“Our rules are about giving consumers the facts they need to make an informed decision about what to do with their savings, and the ability to act on it quickly.”
“The FCA is also working with industry to deliver seven working day switching for the vast majority of cash ISA transfers from January 2017.”
The new rules include:
– Requiring firms to provide key information in a product summary box at point of sale, replacing provisions about the summary box that currently sit in confirmed industry guidance.
– Being clear on what interest rate consumers are getting. Introducing a new rule requiring firms to display interest rate information prominently alongside account balance information in all rate related customer communications.
– Quicker and easier switching. Introducing a new rule which requires firms to provide a prompt and efficient service so that a customer can switch to a better account offered by the same firm.
Danny Cox, chartered financial planner at Hargreaves Lansdown, says: “This is a wakeup call to the banks and building societies which are turning a blind eye to savers who are left abandoned in zombie accounts. It’s clear more needs to be done to help people compare interest rates and then make it easier for them to switch.
“The development of aggregator services will see savers being able to move their money through one central service, from one provider’s account to another, easily and hassle free.
“Change in the market is still at least a year away and in the meantime apathy is the savers’ enemy when it comes to getting the best from cash. Despite interest rates being at record lows, savers can still make more of their cash by regularly reviewing the interest rate and switching from poorly paying accounts.
“Holding cash is really important, but not too much and for those with longer term outlooks the stock market is likely to provide better returns.”