New measures to boost competition in savings market
From December 2016, banks and building societies will have to provide clear information on interest rates offered on cash savings products as well as reminders about changes in interest rates or the end of an introductory rate.
The Financial Conduct Authority has also published so-called ‘sunlight’ data – the lowest interest rates on offer to longstanding customers from 32 providers – after it found around £160bn of easy access account savings earned an interest rate equal to or lower than the Bank of England base rate of 0.5%.
The FCA said it wants to “shine a light on interest rates that are not prominently displayed, but that may be earned by some customers”.
It will publish this data on a trial basis at six-monthly intervals for 18 months.
The FCA also plans to introduce seven working day switching for the vast majority of cash ISA transfers from January 2017.
In findings published at the start of the year, the FCA revealed that accounts opened a long time ago paid lower interest rates than those opened more recently but most consumers do not move their money to accounts that might pay more interest – even with the same provider.
Of the £354bn sitting in easy access accounts, a third has not been moved for over five years.
Christopher Woolard, director of strategy and competition at the FCA, said: “With many savers never switching because they don’t think it will make a difference, our rules will help consumers get the information they need to shop around. In a good market, providers should be competing to offer the best possible deal and should a consumer wish to move accounts, they should be able to do so with the minimum of fuss.
“Our rules are about giving consumers the facts they need to make an informed decision about what to do with their savings, and the ability to act on it quickly.”
Commenting on the measures, Andrew Hagger of Moneycomms.co.uk, said:
“The government has kept rates low as part of its strategy to rebuild the economy – we now have some of the lowest mortgage and personal loan rates on record so it’s no surprise that easy access savings rates have suffered as a result.
“With a number of current accounts paying between 3% and 5% on credit balances savvy people will be using these as a vehicle for their ‘rainy day’ or emergency savings.
“Naming and shaming via the sunlight remedy tables will show the worst of a pretty poor bunch, but even if the information is seen by those who have savings paying miserly returns I’m not convinced we’ll see a step change and people switching in large volumes.
“It’s no wonder the big consumer Peer to Peer players like Zopa and Ratesetter are now pulling in between £40 million and £50 million each every month, particularly when RateSetter is this morning paying 3.3% on it’s monthly access account.”