Savers are being ripped off by banks, says City watchdog

 

The City watchdog confirmed yesterday what millions of savers have known for years – that we’re being ripped off by our banks. How? The Financial Conduct Authority (FCA) has concluded that banks penalise loyal customers with lower interest rates.

The regulator’s comments came after it published the results of a nine-month investigation into the UK’s £1 trillion cash savings market. Its conclusions are damning for Britain’s banks.

It said that because many consumers do not shop around, banks can pay lower interest rates to customers who have stayed with the same account for a number of years. On top of that, the biggest current account providers are able to attract a large proportion of easy-access deposits despite on average offering lower rates.

Christopher Woolard, director of policy, risk and research at the FCA, said: “Competition does not appear to be working in the interest of many consumers.”

With savings rates remaining at record lows for five years, anyone looking for a decent home for their nest-egg has been disappointed. But even the paltry rates that have been offered have been quietly cut by banks, said Anna Bowes of SavingsChampion.co.uk.

“It’s a real concern that providers seem able to cut rates on existing savings accounts at will, as they know that the majority of savers will stay put, even if the rate of interest they are earning has fallen to an uncompetitive level,” she said.

Things have worsened in the past two years after the Government launched Funding for Lending to give banks cheap credit to allow them to lend to small businesses.

Since the scheme was introduced in August 2012, there have been more than 2,000 cuts to existing savings rates, says Bowes.

Which? executive director Richard Lloyd said: “Consumers are losing out on billions of pounds and the banks are simply not doing enough to help customers get the best deals.”

The FCA will now investigate further before deciding whether to take action. It will consider ways of ensuring that more consumers are aware of the rates they receive and the rates offered on other accounts.

It will particularly look at what information customers are given when rates change, especially after any short-term introductory offer ends.

It is also considering what can be done to make it easier to move savings to a new provider, particularly to the so-called challenger banks, and whether other intervention may be necessary.

“In this market there is a minority of very active, very engaged consumers who regularly change provider to get the best deal,” said Mr Woolard. “We want to look more closely at what is inhibiting the majority of consumers from getting better deals.”

The ideal situation is a market in which informed consumers are able to take advantage of the best products, with firms actively competing to win business by improving the products they offer, the FCA said.

It will make its final report in the autumn, which Sylvia Waycot of data provider Moneyfacts said is not before time. “For too long savers have had to suffer whatever paltry rates are offered to them, so it is not before time that the regulator should step in to ensure fair play,” she said.

“This is a great opportunity to put faith back into the savings market, to make it worthwhile and, most of all, rewarding.”

But Lloyd said banks should start to play fair now. “While the regulator continues to investigate, providers should scrap the savings trap and do more to help people make the most of their money,” he said.

“Banks should be crystal-clear about interest rates, let people  know when bonus rates come to an end and make it easier for people  to switch.”

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Digital Optimisation Executive - Marketing

    £30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

    Recruitment Genius: Financial Reporting Manager

    £70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

    Recruitment Genius: Payments Operations Assistant

    £23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

    Recruitment Genius: Telephone Debt Negotiator

    £13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

    Day In a Page

    Sepp Blatter resignation: The beginning of Fifa's long road to reform?

    Does Blatter's departure mean Fifa will automatically clean up its act?

    Don't bet on it, says Tom Peck
    Charles Kennedy: The baby of the House who grew into a Lib Dem giant

    The baby of the House who grew into a Lib Dem giant

    Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
    Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

    The harrowing testament of a five-year-old victim of Syria's endless civil war

    Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
    The future of songwriting: How streaming is changing everything we know about making music

    The future of songwriting

    How streaming is changing everything we know about making music
    William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

    Recognition at long last

    Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
    Beating obesity: The new pacemaker which helps over-eaters

    Beating obesity

    The new pacemaker which helps over-eaters
    9 best women's festival waterproofs

    Ready for rain: 9 best women's festival waterproofs

    These are the macs to keep your denim dry and your hair frizz-free(ish)
    Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

    Wiggins worried

    Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
    Liverpool close in on Milner signing

    Liverpool close in on Milner signing

    Reds baulk at Christian Benteke £32.5m release clause
    On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

    On your feet!

    Spending half the day standing 'reduces risk of heart attacks and cancer'
    With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

    The big NHS question

    Why are there so few new GPs when so many want to study medicine?
    Big knickers are back: Thongs ain't what they used to be

    Thongs ain't what they used to be

    Big knickers are back
    Thurston Moore interview

    Thurston Moore interview

    On living in London, Sonic Youth and musical memoirs
    In full bloom

    In full bloom

    Floral print womenswear
    From leading man to Elephant Man, Bradley Cooper is terrific

    From leading man to Elephant Man

    Bradley Cooper is terrific