You are here: Home - Saving & Banking -

Consumer Panel research makes case for automatic upgrades

Written by: Emma Lunn
The Financial Services Consumer Panel has asked the Financial Conduct Authority to consider introducing an ‘automatic-upgrade’ rule.

The request comes after research found consumers are trapped in poorly performing financial services products to their detriment. The study found that the costs of remaining in such products can represent a notable proportion of a consumers’ annual income.

The Financial Services Consumer Panel has written a position paper titled ‘The Case for Automatic Upgrades’. The paper asks the FCA to consider the merits of introducing a new automatic-upgrade rule. This would either require a firm to automatically upgrade its customers to its best available product or offer them a choice of better quality and better value products within the firm’s portfolio which suit their needs.

The recent super-complaint from Citizens Advice raised concerns about long term customers paying more for goods and services, which it referred to as ‘the loyalty penalty’. The Panel’s research investigated this further.

Conducted by Europe Economics, the research used the FCA’s ‘Financial Lives’ data to identify the products which were held by the ‘average’ consumer. The eight products examined were: current accounts, cash ISAs, credit cards, mortgages, investment products, pensions, home insurance, and income protection.

The research found that some consumers could be incurring loyalty penalties equating to more than 5 per cent of their annual income, adding that it wasn’t impossible to imagine there were some consumers for whom these costs were as high as 10 per cent of their income.

Wanda Goldwag, panel chair, said: “The research demonstrates the detriment for consumers of remaining in poorly performing products and the need to ensure that all consumers are treated fairly. Loyal customers are often those who are too busy to search for and switch to better products, those who do not switch due to behavioural biases, those trapped with their existing provider or those who are not aware that better alternatives exist. Consumers should not be penalised for this loyalty. An automatic-upgrade rule would level the playing field.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

The savings accounts paying the most interest

If one of your jobs this month is to get your finances in order, moving your savings to a higher paying deal i...

Everything you need to know about being furloughed

Few people had heard of ‘furlough’ before March 2020, but the coronavirus pandemic thrust the idea of bein...

Coronavirus and your finances: what help can you get in the second lockdown?

News and updates on everything to do with coronavirus and your personal finances.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week

  • @YourMoneyUK I will be travelling to UK from Gran Canaria and im in reciept of pension credit, am i eligible for this payment?
  • Unclaimed money scheme expanded to aid Covid recovery: @YourMoneyUK
  • RT @thenutmegteam: Keeping on top of your pension now could well pay dividends in the future. ⏳ Nutmeg's savings and investments specialis…

Read previous post:
New scheme to help people suffering from poor mental health with finances

The Money and Mental Health Policy Institute has launched the ‘mental health accessible standards’ to help financial firms address the...