FCA Cash Market Study
Industry watchdog calls an end to stealth rate cuts and misleading account names.
The industry regulator, the Financial Conduct Authority (FCA), announced back in January its proposals to improve competition in the £700 billion cash savings market. Following feedback from banks and building societies and of course ourselves, among others, it has now announced some of the measures it plans to put in place.
Key changes are being introduced, some of which we believe that providers should already be doing, although our existing Rate Tracker Services covers a lot of them. These include clearly displaying interest rates so it’s encouraging that the FCA has now acted to stamp out some bad practices.
The changes also include clear communication and alerts to savers for all disadvantageous rate changes, including when bonuses are due to expire. We know that whilst providers do inform customers about disadvantageous changes, some do so, far in advance, with no follow up, so that savers either act too soon or forget and don't act at all. The new rules will mean providers must inform savers two weeks before the change is due to take place. Our Rate Tracker notifications have a before, during and after approach to nudge you in the right direction if your account is no longer competitive and you need to switch when the rate drops.
The FCA is also banning misleading account names, something we’ve been talking about for years. It’s fair to say that many of these accounts are a legacy from way back when they did pay competitive rates of interest, Halifax Liquid Gold is a good example, paying 10% (no I haven’t missed a decimal point) back in the 80s, but now it pays a paltry 0.10%!
Given that £160 billion is sitting in easy access accounts paying 0.50% or less, a good proportion will be in these defunct gold savings accounts. If you hold one of these accounts, why not check out our best buy tables and switch to improve your rates.
The FCA is also consulting on a switching box on all customer communications in addition to the interest rate information mentioned above. This will show savers the benefit, if any, of shopping around.
If you've over £100,000 in cash and want to take a free savings health check on your current savings situation, we can help. We'll look to build a bespoke savings portfolio, getting you the very best rates, whilst keeping money protected. Find out more here.
Another measure being introduced is to reduce the switching time for Cash ISAs from 15 to 7 days from 1 January 2017. This may encourage more people to switch.
It also plans to publish a table to name and shame providers paying the lowest rates in the hope that this might encourage better practices.
Christopher Woolard, Director of strategy and competition at the FCA said “In a good market, providers should be competing to offer the best possible deal. Consumers should expect the information they need to shop around to be clear and easy to understand.
"When they wish to move accounts, they should be able to do so with the minimum of fuss."
As many of you know, at Savings Champion we monitor each and every individual savings rate from all live and closed UK savings accounts. We launched our business to fill a basic gap in the market; clear uncompromised information on savings accounts, to keep all savers informed of changes to their savings accounts through our Rate Tracker service.
It always seemed to us like an essential service, keeping savers informed of the rate they’re getting and how competitive it is, when compared to the whole market. Although the measures, most of which are due to be introduced next year, are good news for savers, it doesn't mean you can afford to rest on your laurels.
You still need to act. If more of us switch to better paying accounts then, collectively, we'll encourage competition in the market. The more banks and building societies compete for our business, the better the rates on offer.
Speak to one of our specialist savings advisers for help 0800 321 3581.
From next year you'll be armed with better information to make better choices, unless of course you're already signed up to Rate Tracker. In which case - you're already fully informed and don't need to wait until next year when the banks and building societies have finally caught up!