The Financial Conduct Authority (FCA) has warned that UK savers are still losing out, three years after new measures were introduced to improve the saving rates available through banks.
In 2015, the FCA found that customers who held long-term savings accounts through their banks were earning significantly less interest than those who switched banks on a regular basis.
Furthermore, 80 per cent of all easy access savings accounts had not been switched in the previous three years.
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In an effort to make the savings landscape fairer for consumers, the regulator introduced new guidelines including a seven-day switching period for cash ISAs, and better transparency rules for banks and building societies.
However, in a recent meeting board members of the FCA admitted that savers were still not getting a fair deal, and that measures taken in 2015 to improve transparency and fairness in the market had not worked.
The minutes read: “The board was reminded that the 2015 cash savings market study identified some harms for which a number of remedies aimed at improving how customers can open, manage and switch their accounts, had been implemented. These harms were not fully addressed by the remedies implemented, additional remedies are therefore being proposed to address the outstanding harm. The board noted that the proposals follow the testing of remedies to improve switching which did not succeed.”
According to the most recent FCA data, in October 2016 the average branch-based closed savings account paid just 0.1 per cent, while non-branch-based closed savings accounts paid just 0.23 per cent on average.
Meanwhile, the base rate for banks reached 0.5 per cent at the end of last year, while inflation climbed to 2.7 per cent.
“When people are working so hard to put money aside for the future, it’s only right that the money they are putting away is working just as hard for them,” said Sarah Coles, personal finance analyst at investment platform Hargreaves Lansdown.
“Clearly, as the FCA has found, this isn’t always the case at the moment. And while it’s good news that it is trying to improve things, the fact that it is planning more consultations and proposals means there won’t be a solution overnight.
“This is going to be a tough nut to crack, so it’s important to take action with your own savings as soon as possible. You can put your emergency cash savings safety net into an easy access savings account paying up to 1.35 per cent. After that it’s important to work out the most sensible period of time to lock your savings away. Because while savings rates are hardly a reason to be cheerful at the moment, it doesn’t mean you need to stick with a savings account that’s profoundly depressing.”
The FCA has announced plans to work on a new discussion paper to collect further information before it considers its final proposals.