It should be easier for consumers to compare cash savings accounts and then switch providers if they wish, said the Financial Conduct Authority (FCA).
The FCA comments came on 20 January, following a market study that showed competition in the £700 billion cash savings market often did not work well for consumers, particularly those with long-standing accounts.
It found that around £160 billion of funds held in easy access savings accounts earned an interest rate equal to or lower than the Bank of England base rate of 0.5 per cent in 2013, yet consumers often find it difficult to know what rate they were on or were put off switching by the expected inconvenience. There was no switching of 80 per cent of such accounts in the last three years.
The FCA found balances held in older accounts, which represent a significant proportion of providers’ total savings balances, earned lower interest rates than those in more recently opened accounts. Consumers received little information about alternative products and often assumed switching accounts would require a lot of effort for limited benefit.
Christopher Woolard, director of strategy and competition at the FCA, said: “In a good market firms should be competing to offer the best possible deal and consumers should have the information they need to help them shop around.
“We want to see firms making simple information much easier to find. More also needs to be done to reduce the hassle for consumers to switch their savings.”
The FCA has proposed a series of reforms and is seeking comments on these by 18 February. It will use feedback received to inform any future changes to its rules. The proposals include:
- asking providers to be more transparent about how reductions in interest rates on variable rate savings accounts are applied the longer a consumer holds the account
- requiring consumers to be given clearer, more timely information to help them compare their savings account with alternative products and understand how to switch if they want to do so, including providers improving the way they communicate interest rate changes and bonus rate expiry to consumers
- making switching as easy as possible so consumers are not put off moving their money to another provider or to another savings account with the same provider, and a reduction in the current 15-day switching time for cash ISAs.