A year ago, the Financial Conduct Authority (FCA) brought in consumer duty rules, designed to ensure that firms are being fair to their customers. And this includes banks and building societies. The FCA said that those who did not comply could be fined.
Whilst expected to provide fair value with the rates on their on-sale accounts initially, providers were given a year to review their off-sale accounts. Wednesday 31st July 2024 was the deadline for providers to improve the rates on their closed accounts – often famously ignored and left behind. Many savers who have failed to review their old savings accounts will probably be shocked to see that they are earning far less than new customers being lured in by shiny top rates. Sometimes this is because a bonus that was clearly stated at outset has expired and therefore the underlying rate now applies, but sometimes it’s simply because the rates have been quietly cut – or the rate has not increased when base rate and other savings rates have been.
There are some spectacular examples – Virgin Money is still paying 0.25% and 0.35% on many old issues of its easy access accounts – worse still it is paying 0.10% on its E-Access Issue 1 account that was withdrawn in October 2011. In the meantime, the current issue of its Defined Access E-Saver is paying 4.76% AER if you make three or fewer withdrawals, which drops to 2% if you make any more.
Virgin isn’t alone. If you opened an Online Easy Access account with Cynergy Bank more than 12 months ago, your bonus will have dropped off and therefore you could be earning as little as 1%, which is what is currently being paid on issue 1 – 52. It’s current offering – Issue 78 – is paying 4.94% AER which includes a bonus of 1.19% for the first 12 months, so assuming the underlying rate is not changed before then, the rate will drop to 3.75% after 12 months. It’s a similar picture with the Post Office, Shawbrook Bank and Sainsburys, to name a few.
On the flip side, you have Aldermore Bank which pays the same rate of 4.50% AER on all 15 issues of its Easy Access Account, showing that it can be done!
It’s not just the closed accounts that the FCA is concerned with. At the end of July last year when it introduced its 14-point plan, point 1 stated that the FCA will “Require firms offering the lowest rates to provide their fair value assessments under the Consumer Duty by 31 August 2023 and take robust action by the end of 2023 against those who cannot demonstrate fair value.”
It’s bewildering to see therefore, the poor rates that many providers are offering to new customers as well as existing – in particular our high street banks.
For example, Barclays is offering easy access customers in its Everyday Saver 1.66% AER on the first £10,000, but applying a rate of 1.16% AER of any additional funds, therefore diluting an already extremely uncompetitive return.
And with the base rate being cut to 5%, from 5.25% AER at the latest Monetary Policy Committee (MPC) meeting, it’ll be interesting to see how much of that cut they pass on to savers, having failed to pass on much of the increases over the last few years.
What can savers do?
Whilst we wait and see if the FCA will follow through on threats to fine those who don’t comply, as a saver, you can at least do something to help yourself right now; Ditch and switch!
Unfortunately, not all savings providers treat their customers fairly, especially when it comes to the rates being paid on older off-sale accounts, when compared to the ‘shop window’ products that can lure new customers through the door. With the FCA deadline passed, it’s disappointing that some providers seem to be either ignoring the initiative or are waiting until they are threatened before they are forced to do the right thing. Either way, these are not providers who deserve your hard-earned cash and if they are being forced they are likely to do the bare minimum. If you discover that you have money rotting in one of these accounts, make the move as soon as possible to a provider who is prepared to pay you a better rate – after all, it’s better that you have that money in your pocket. Don’t let these banks rob you of what you are due.
@savingschampion
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