Cash savings: Sunlight remedy

Published: 08/12/2015     Last Modified: 04/04/2016

We are publishing the lowest interest rates available on open and closed easy access cash savings accounts and easy access cash ISAs. This publication is designed primarily for market commentators and aims to bring to light firms’ strategies towards their longstanding customers. This is the first trial publication of this information and reports interest rates offered as at 1 October 2015. We will publish the next report in May 2016.

In our cash savings market study we found that accounts that were opened a long time ago pay lower interest rates than those opened more recently. Despite this, we found that a significant number of consumers do not move their money to accounts that might pay more interest - even with the same provider.

We asked firms to tell us the lowest possible rate that customers could earn across all of their easy access cash savings accounts and easy access cash ISAs. We are publishing this information to raise awareness of firms’ strategies towards their longstanding customers. This should also encourage firms to offer better value products to existing customers, especially those with products no longer on sale.

The information reveals differences in the rates firms have on offer on accounts. While we recognise that firms offer a range of accounts and the lowest rate that a customer could earn is only one part of a bigger picture of firms’ treatment of their customers, it does show that some consumers could be better off by choosing a different account.

We have called this publication the ‘sunlight’ remedy because we are shining a light on interest rates that are not prominently displayed, but that may be earned by some customers. These customers stand to lose out by not switching to a different account.

Using this information

This information is targeted at market commentators, consumer groups and the media. Although some individual consumers may read this information, we have not published it as a tool for shopping around. This is because the lowest possible rates we are publishing do not necessarily reflect the typical rate that a customer is earning. Some products offer different rates of interest where, for example, customers meet different conditions or according to the customer’s account balance, which might mean a higher rate of interest is paid.

Price comparison websites, on the other hand, provide tools to compare the best interest rates from certain providers and play an important role in many consumers’ choice of savings accounts.

We collected information on the lowest interest rates offered on easy access cash savings accounts and easy access cash ISAs by the 32 largest providers (totalling 39 brands). We asked these firms to provide a breakdown of accounts that can be managed in their branches and those than cannot.

Download the data (PDF)

As set out in CP15/24 and PS15/27 we will be publishing information on firms’ lowest interest rates on a trial basis at six-monthly intervals for 18 months. During this time we will evaluate our approach and assess the impact of publishing this information.

Interpreting the data

As explained in the notes to the tables, the interest rates shown are the lowest rates firms pay on accounts that do not have:

  • Any restrictions on deposits or withdrawals (other than those imposed by ISA regulations)
  • A notice period for making withdrawals
  • A requirement for a minimum operating balance of more than £100

In addition:

  • Where an account has a tiered interest rate structure (where different interest rates apply to different account balances), we show the lowest rate paid within the tiered structure on balances of £100 or above
  • Some accounts may have a minimum opening balance requirement of over £100 but allow lower operating balances. In this case we have considered the lowest rate that is applied to any balance in that account and included that if it is the lowest interest rate available across all relevant accounts provided by that firm
  • Where an account has attached conditions which will give customers a higher rate of interest, we show the interest rate which applies when these conditions are not met
  • By open accounts we mean accounts that were open to new customers as at 1 October 2015
  • Closed accounts are accounts which were still operated but were not open to new customers on 1 October 2015
  • Some providers no longer offered certain accounts to new customers on 1 October 2015 (e.g. accounts not available in branch) which explains some nil returns in the ‘open’ columns. In addition, some providers do not cease to offer certain accounts to new customers (i.e. they remain open by our definition), which explains the nil returns in the ‘closed’ columns

Our findings (October 2015)

The interest rates reported ranged from 0% to 1.75% (see tables A and B below). While these interest rates do not represent the best rates available in the market, even when comparing the lowest rate offered by providers of these products, some consumers could be better off by opening a different account.

Based on the interest rates reported by firms:

  • The median lowest interest rate is higher on open accounts compared to closed accounts for branch-based and non-branch based easy access cash savings accounts and easy access cash ISAs
  • At least half of the providers in our sample offer a lowest interest rate of 0.10 or less on closed easy access cash savings accounts (that can be managed in branch)
  • At least half of the providers in our sample offer a lowest interest rate of 0.50 or less on closed easy access cash ISAs (that can be managed in branch)
  • The median lowest interest rate is higher on accounts that cannot be managed in branch compared to those that can for each of the products we looked at

Table A: Range of lowest interest rates available on easy access cash savings accounts

 

Branch access

No branch access

 

Open accounts

Closed accounts

Open accounts

Closed accounts

Maximum

1.40

1.25

1.61

1.41

Minimum

0.01

0.01

0.05

0.00

Median

0.25

0.10

0.60

0.25

Table B: Range of lowest interest rates available on easy access cash ISAs

 

Branch access

No branch access

 

Open accounts

Closed accounts

Open accounts

Closed accounts

Maximum

1.50

1.75

1.51

1.50

Minimum

0.10

0.05

0.50

0.25

Median

0.75

0.50

1.06

1.00

Next steps

We plan to continue to publish the sunlight remedy at six-monthly intervals. Providers of easy access cash savings accounts and easy access cash ISAs that are not included in our sunlight tables and would like the opportunity to submit data should contact us at cashsavings@fca.org.uk.

Notes

  • The information provided to us by firms and published here was correct at 1 October 2015. The rates reported may have changed since that date.
  • Although the 32 providers selected represent the vast majority of the cash savings market, we have not published rates for the whole of the market.
  • The median is the middle number of a group of numbers. If there is an even number of numbers in the set then the median calculation used here takes the average of the two middle numbers.
  • We also offered providers of easy access cash savings accounts and easy access cash ISAs that were not in our sample of 32 firms the opportunity to respond to our data request on a voluntary basis. None did so for the period reported here.

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