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Consumer Duty doubts: Big banks still pay ‘sub-par’ savings rates

Consumer Duty doubts: Big banks still pay ‘sub-par’ savings rates
Matt Browning
Written By:
Matt Browning
Posted:
05/06/2024
Updated:
05/06/2024

Consumer Duty rules might have been in place for a year, but the big banks are still paying way below the market average on savings rates, a finance research company finds.

HSBC, Lloyds, NatWest, Barclays and Santander all offer less than 2% on their non-notice savings accounts, whereas over 80% of the market pays 2% or higher on a savers’ £10,000 balance, Moneyfacts’ data reveals.

On average, those banks pay 1.69% to customers who wish to make returns on their returns, which is 1.43% less than the market average for all easy-access accounts.

For easy-access ISA accounts, this drops even further to 1.62%, which is not even half of the rest of the market’s 3.31% average.

Those rates are dwarfed by the market-leading easy-access account offer from Ulster Bank. Its 5.2% rate on the Loyalty Saver is 3.33% more lucrative for cash savers than what the big banks can muster.

Meanwhile, the best rate from one of the five big banks across easy-access accounts is from HSBC, which has a Flexible Saver option priced at 1.98% for deals available to new customers.

The offers come as Consumer Duty rules from the Financial Conduct Authority (FCA) have almost reached their one-year anniversary.

New rules introduced on 23 July 2023 included a 14-point plan that aimed to combat paltry savings rates from the UK’s biggest banks. Previously, the offending big banks were asked to explain the reason for the low prices to the Treasury Committee.

Following the new legislation, banks were told that “it is critically important that customers can benefit from competitive interest rates to protect the value of their savings”.

Urgency on improved rates ‘remains to be seen’

James Hyde, spokesperson at Moneyfactscompare.co.uk, said: “Companies have had almost a year now to review any previously uncompetitive products and bring them into compliance with the rules laid out by the Financial Conduct Authority.

“Unfortunately, the big five banks are still paying significantly sub-par variable savings rates. Their most accessible no-notice accounts all offer less than 2% interest per annum – putting them all in the bottom fifth of the market.

“Currently, a saver who put £10,000 in an easy-access ISA offered by a big bank would lose out on £169 in interest each year (compared to the market average rate paid), or £344 (on a market-leading account).”

Hyde added: “Rules regarding closed accounts come into effect this summer, so it remains to be seen if there is more urgency to improve rates going forward.

“As always, customers are encouraged to proactively monitor savings rates, particularly if they’re on a variable rate, which providers can adjust on a very reactive basis. People should be prepared to switch if they feel their loyalty is not being adequately rewarded.”