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FCA reveals failures of £700bn cash savings market

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.

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Daft nonsense. If the FCA want to wonder why consumers are let down by this market, they could go and ask Mark Carney why the Bank of England did so much QE. But den he da boss, so the FCA ain’t going to ask the most obvious question despite hypocritically touting themselves as an “independent” regulator.

    Recently a bank manager advised my wife that “their rates were embarrassingly low” because they were so awash with QE cash there was no incentive to compete for her deposit. He candidly said also that at a recent manager’s internal convention, that bank’s senior guy turned to the topic of “our savings products” and there were howls of derisive laughter. Put that in you bleedin’ schedule of work, Mr FCA, and analyse it.

  2. I think the biggest reason why consumers fail to get the best rates of interest on cash savings is plain old inertia plus, amongst many of those unwilling to undertake for themselves a bit of comparative research once a year, reluctance to pay even a modest fee to someone else to do it for them. There are plenty of online sites that set out the various rates available and a few are quite reasonable for those willing to commit to something longer term that just a plain old instant access account.

    Also, I believe, deposit taking institutions are obliged to notify savers, in writing, every time they change the rate/s of interest that they’re paying. If consumers are too lazy to take note of such information and do something about it, on their heads be it. It’s not always the fault of the providers.

  3. My bank has just cut my cash ISA rate to 0.5%. The best rate I can get by moving it elsewhere is 1.45%. In exchange for phoning them up, filling in forms, chasing both banks for weeks, and then doing it all again when the new bank cuts the rate, I would earn just over £1 a month. Also I would lose the convenience of the current ISA being with the same bank as my current account. I would have to be a complete moron to undervalue my time to that extent.

    So I go into the FCA’s statistics as some poor lamb who “struggles” to realise that the nasty banks are fleecing him. Laughable.

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