The city watchdog for finance has revealed places to out any banks that offer low interest rates to longstanding customers. An investigation by the Financial Conduct Authority has displayed that competition in the savings industry has not been benefiting UK savers as well as it should be.
There are lots of savers that have money tucked away in extremely old accounts which no longer provide any form of competitive interest
Many of these savers have clearly forgotten how much the interest on these accounts was scheduled to drop by once the introductory period had ended. In the worst case scenario the interest on these accounts has dropped to as low as 0.05%.
The Financial Conduct Authority has now said that banks must be “clear on what interest consumers are getting”. The aim behind this is that interest details should be made clearer to those that have accounts with the companies in question. This includes letting savers know when their interest rates are changing, when their introductory offer has ended or once a fixed rate period is over.
Andrew Hagger, from Moneycomms.com has stated:
“These proposed enhancements for savers are welcome but long overdue – providers should have been doing these basics as a matter of course and it shouldn’t have needed the regulator to step in to make it happen.”
“For too long providers have increased profitability to the detriment of customers as their cash sits in accounts offering miserly returns.”
“Making interest rate information more prominent and increasing communication when introductory rates come to an end should help consumers earn a better return on their cash.”
“Too often banks and building societies offer best buy deals for new customers whilst hoards of loyal savers on the back book are left with long forgotten deals paying next to nothing.”
There are also calls for the FCA to make it easier for consumers to change their savings accounts. One of the aims is to allow savers to be able to change their ISA within seven days, it is hoped that this will be the case from January 2017
An extension of this rule is a new call banks to make it easier for their existing customers to change to a better savings account provided by their current bank.
The director of strategy and competition at the FCA, Christopher Woolard, stated:
“In a good market, providers should be competing to offer the best possible deal.”
“Consumers should expect the information they need to shop around to be clear and easy to understand. When they wish to move accounts, they should be able to do so with the minimum of fuss.”
“Our package of measures are all about giving consumers the information they need to make an informed decision about what to do with their savings, and the ability to act on it quickly.”
There are also moves being made to reduce the amount of complicated jargon that it used in the industry, with the FCA saying that the data provided needed to be made clearer so that customers could compare accounts more easily.
The interest rates that are being offered on savings accounts has seen a slight upwards trend in the past few weeks, with the best rates on one fixed deals going up from 1.75% to 2.07% – offered by Paragon Bank.
The FCA is now waiting for a response to its proposals with a confirmation expected by the end of 2015 and most of the rules taking place in 2016.
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