'Scrap the trap': calls for change grow as banks are told to play fair with loyal savers
City regulator says existing customers suffer worst rates
The City watchdog confirmed this week what millions of savers have known for years – that we're being ripped off by our banks. How? The Financial Conduct Authority (FCA) 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 of the UK's £1 trillion cash savings market. Its conclusions were damning for Britain's banks.
It said that because many consumers do not shop around as a rule, banks can pay lower interest rates to those 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 larger proportion of easy-access deposits despite, on average, offering lower rates.
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 those paltry returns have been quietly cut by the banks, said Anna Bowes at the advice site 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 explained.
Richard Lloyd, executive director at the consumer group Which?, 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 interest rates they receive and the returns offered on other accounts.
It will look particularly 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 forms of intervention may be necessary.
But Mr Lloyd believes that 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.
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