Savers are being let down by banks and building societies, the City Watchdog warned this morning.
The Financial Conduct Authority announced plans to overhaul the £700billion cash savings market after revealing that it doesn’t work well for consumers.
Worse hit are loyal customers with long-standing accounts – their loyalty is rewarded with lower interest rates than more recently-launched accounts. Around four-fifths of easy access accounts have not been switched in the last three years.
FCA director of strategy and competition Christopher Woolard said: "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."
The regulator’s investigation into the market found that around £160billion was held in easy access savings accounts that pay interest lower or equal to the Bank of England base rate of 0.5 per cent. Consumers find it difficult to know what rate they are on, or are put off switching by the expected inconvenience but improving the timing and content of communications from firms to customers can increase shopping around.
The Watchdog wants providers of cash savings accounts to be more clear about how cuts in interest rates are applied the longer a consumer holds the account. This includes displaying prominently the lowest rate of interest any of their customers receives.
"We want to see firms making simple information much easier to find," said Mr Woolard. "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."
Which? executive director, Richard Lloyd, said: "For too long, banks and building societies have left customers trapped in savings accounts paying woefully low interest rates and losing out on billions.
"We expect to see the industry working with the regulator to make these recommendations a reality as soon as possible. The banks must quickly start playing fair and help consumers get a good deal."
The FCA has given savings institutions until 18 February to respond to its proposals.Reuse content