Plan to protect longstanding savers will give consumers extra £260m, says FCA | Business News

By January 9, 2020 No Comments
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Savers could gain an extra £260m under plans by the City watchdog to protect longstanding customers who currently lose out as their interest rates are whittled down.

Plans by the Financial Conduct Authority (FCA) would see a single rate introduced across banks’ easy access savings accounts.

Firms will still be able to offer introductory “teaser” rates for up to 12 months to attract customers.

But after this they would have to revert to the same rate as longstanding account holders.

Banks would need to choose one universal rate for easy access cash savings account and another for easy access cash savings ISAs.

The FCA said loyal customers would be expected to gain as banks will compete to offer a higher “single easy access rate” as they seek to retain those coming off an introductory 12-month offer.

Christopher Woolard, executive director of strategy and competition at the regulator, said: “Competition is not working well for many of the 40 million consumers with easy access savings accounts and we want that to change.

“Our proposals would mean firms have a single rate for customers immediately after their accounts have been open for 12 months.

“Firms will choose the rates they offer, and the rates they offer will have to be clearly published.

“This will prevent firms from gradually reducing interest rates over time and make them compete for all their customers.

“We are concerned that many longstanding customers are seeing a poor outcome and we want firms to focus more on these customers.

“The new rate will also make it easier for savers to know whether they are getting a good deal after any introductory offer has expired.”

Sarah Coles, personal finance analyst at Hargreaves Lansdown said: “The single easy access rate will help protect the most reluctant switchers from death by a thousand cuts.

“But the rate is still going to be pretty parsimonious, and it comes at a cost to all other savers – who need to up their switching game to avoid missing out.”

Eric Leenders, managing director of personal finance at UK Finance, said: “UK Finance and its members will consider these proposals carefully and will continue to work closely with the FCA to ensure fair outcomes for all customers.”

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