You are here: Home - Saving & Banking - News -

Regulator proposes new minimum savings rate

0
Written by:
25/07/2018
Banks may soon have to offer a minimum savings rate to ensure longstanding customers get a fair deal, the city regulator has said.

The Financial Conduct Authority (FCA) has today launched a consultation into combating the issues faced by customers who stay with the same bank for a long time and do not switch.

These customers often receive lower interest rates on easy access cash savings products than those offered to new customers.

Banks use introductory or teaser rates to entice new savers, but these rates plummet – sometimes to as low as 0.05% – after a certain period of time.

The FCA said the proposed basic savings rate would apply to all easy access cash saving accounts and easy access cash ISAs after they have been open for a set period of time, such as a year.

Banks would be able to set their own basic savings rates, which would be the same for all customers.

Christopher Woolard, executive director of strategy and competition at the FCA said: “Providers can take advantage of high levels of customer inaction to pay lower interest rates to longstanding customers. While many customers have valid reasons for not shopping around, providers must still treat them fairly, while maintaining competitive rates for those who do.”

He added: “Efforts to encourage customers to switch have had limited impact and we remain concerned about the way firms are treating customers. This is why we are considering the introduction of a basic savings rate for older accounts, which would promote competition and help get customers a better rate of interest.”

FCA research in 2013 found that a third of savers with easy access accounts had held the money in there for at least five years, and 46% had held those accounts for at least two years. It also found that the longer money had been in these accounts, the lower the average interest rate they received.

Shopping around

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said a basic savings rate would improve rates for non-switchers, but only “by a smidgen”.

“According to the calculations in this paper, it would boost it by less than 0.1%, so it’s not going to remove the need for savers to shop around to get a decent rate,” she said.

The FCA expects banks to cut  introductory rates to pay for higher rates for those who hold accounts for longer periods.

“This will make switching even more important for those who want the best rates,” she said.

Susan Hannums, co-founder of independent savings advice site Savings Champions, said a basic savings rate may make savers “less compelled” to switch.

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.

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

The essential Your Money guide to the April 2018 tax changes

As we head into the 2018/19 tax year, a number of key changes take place to existing policies while some new i...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

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

  • RT @YourMoneyUK: A robo-adviser or a traditional platform? What's the best home for your kid's ISA? @jofaithy - https://t.co/EGrgxFYx33
  • RT @Defaqto: Over two-fifths of travel insurance policies offer no protection for airline failure, our research shows. Only around half (48…
  • Over two-fifths of travel insurance policies offer no protection for airline failure, our research shows. Only arou… https://t.co/c34mDkDpFM

Read previous post:
A row of terraced houses overlooks a view of London
10% drop in home moves by homeowners since Brexit vote

UK homeowners are choosing to stay put, with the number of home moves plummeting by 10% between 2016 and 2017,...

Close