Switching savings accounts could become “quicker and easier” under new proposals outlined by the City regulator that will force firms to provide clear information on interest rate on cash savings products, and clearly alerting consumers to changes in interest rates, such as the end of an introductory rate.
The Financial Conduct Authority (FCA) has already undertaken a study into the UK’s £700bn cash savings market, and found that for many consumers, competition in the sector was not working as effectively as it could. The proposals would allow savers to move their money more quickly to take advantage of better savings rates elsewhere.
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.
“Our package of measures are all about giving consumers the information they need to make an informed decision about what to do with their savings, and the ability to act on it quickly.”
The measures being proposed include the removal of jargon so customers can understand their options more easily, making it clear about the interest customers are getting, making it faster and easier to switch accounts – with plans to allow account switching within seven days by January 2017 for cash individual savings accounts (Isas) – and making it clear which firms pay the lowest rates. The FCA plans to name those that are persistently low payers.
Rachel Springall, Finance Expert at Moneyfacts.co.uk, said: “The latest proposals by the FCA are clearly for the benefit of savers and some rules may fall into place as early as next year, with a faster transfer process on ISAs expected from 2017.
“Changing or implementing a process to inform customers of rate alterations can be costly, so savings providers may decide to consolidate their range of deals, which may lead to the withdrawal of good accounts or a levelling of rates.
“Nevertheless, a rate alert system can still be beneficial to savers. Moving a savings pot from one bonus rateaccount to the next is a clever way to take advantage of higher returns, but for consumers who are less proactive, it may mean that they end up sitting on a paltry rate for a long time. These new measures from the FCA will help consumers to plan better, as well as support those who may forget when a long-term investment matures.”
Nationwide Building Society – which has a facility it calls SavingsWatch which updates its own savers via email or text if there are any changes to their interest rate – also welcomed the move.
Andrew Baddeley-Chappell of Nationwide, said: “Savers should have the freedom to switch easily between savings providers and we are supportive of seven day switching for cash Isa transfers. We look forward to the industry continuing to make the switching experience even better so that customers can make the most of the opportunities available to them.”
The FCA is looking for feedback on the proposals, and if you want to comment on the proposals, then send your views by October 2, 2015 in writing to:
Strategy and Competition Division: Policy
Financial Conduct Authority
25 The North Colonnade
London E14 5HS