Banks short change savers, says FCA

Savers in Britain are getting a poor deal from their banks, says the Financial Conduct Authority, FCA. The regulator found that £160 billion in savings is currently earning less than or equal to the Bank of England’s base rate, 0.5 per cent.

The FCA also stated that savers are finding it difficult to compare savings accounts and so to switch providers. During the last three years, 80 per cent of quick access accounts have not been switched because many savers are put off by the perceived inconvenience.

Many savers are not even aware that the rate of interest that they are receiving has fallen. In future, the FCA says, building societies and banks must display the rates of interest their customers are receiving prominently in all communications with them.

However, the FCA has not banned the controversial so called ‘teaser rates.’ These attract savers with high interest rates for an introductory period of say six months or a year, after which the interest rate generally falls dramatically to around 0.5 per cent.

Christopher Woolard, the FCA’s director of strategy and competition, said that the FCA has no plans to ban introductory high interest rate accounts because many customers benefit from them. However, it will be demanding that banks and building societies improve their communication with their clients and ensure that they know exactly how much interest their savings are earning and when their high introductory rates expire.

The FCA found that a significant proportion of savings are held in older accounts which earn lower rates of interest than newer accounts. Savers receive scant information from their providers about alternative accounts they could switch to and often assume that the process of switching will be time consuming and problematic.

Woolard added that banks and building societies must be more transparent about reductions in interest rates on all their savings accounts.