Consumers need help in comparing the interest rates they earn on cash saving accounts and should be alerted of their ability to switch to other providers, the FCA says.
The regulator’s study of the £700bn cash savings market found it “often does not work well for consumers, particulary those with long-standing accounts”.
It reveals customers struggle to know what rate they are on and are reluctant to switch to better rates even from easy access accounts – 80 per cent of easy access accounts have not been switched over the last three years.
£160bn of savings held in easy access accounts had interest rates equal to or lower than the 2013 0.5 per cent Bank of England base rate, the study shows. It also reveals the longer funds are held in the same account, the lower the interest earned compared to recently opened accounts. The FCA says customers suffer from a lack of information about alternatives.
FCA director of strategy and competition Christopher Woolard says: “In a good market firms should be competing to offer the best possible deal and consumers should have the information they need to help them shop around.
“We want to see firms making simple information much easier to find. More also needs to be done to reduce the hassle for consumers to switch their savings. The steps we have proposed today are designed to make the market more dynamic, working in everyone’s interest.”
The FCA’s proposed remedies include making providers more transparent about how rates on variable accounts fall the longer a customer stays put and ensuring customers are given the information they need to switch providers. However, The regulator says it is not planning to ban introductory bonus rates.
It also wants to make the switching process quicker and smoother and a reduction in the 15 day switching time for cash Isas.
Views on the proposals should be sent to the FCA by 18 February.