Consumers with cash savings need better information and easier switching says FCA

Published: 20/01/2015     Last Modified: 22/01/2015

It should be easier for consumers to compare cash savings accounts and then switch providers if they wish, said the Financial Conduct Authority (FCA), following a market study that showed competition in the £700bn cash savings market often does not work well for consumers, particularly those with long-standing accounts.

In particular, the FCA found around £160bn of the funds held in easy access savings accounts earned an interest rate equal to or lower than the Bank of England base rate of 0.5% in 2013, yet consumers often find it difficult to know what rate they are on, or are put off switching by the expected inconvenience. 80% of easy access accounts have not been switched in the last three years. Research by the FCA also found that simple changes in the timing and content of communications from firms to customers can significantly increase shopping around.

Christopher Woolard, Director of Strategy and Competition at the FCA, said:

"In a good market firms should be competing to offer the best possible deal and consumers should have the information they need to help them shop around. We want to see firms making simple information much easier to find. More also needs to be done to reduce the hassle for consumers to switch their savings. The steps we have proposed today are designed to make the market more dynamic, working in everyone’s interest."

The FCA found balances held in older accounts, which represent a significant proportion of providers' total savings balances, earn lower interest rates than those in more recently opened accounts. Consumers receive little information about alternative products and often assume switching accounts will take a lot of effort for limited benefit.  Large personal current account providers have considerable advantages over other providers because they can attract most easy access balances despite offering lower interest rates.

The FCA is proposing a number of changes to the cash savings market to address these concerns. These include:

  • Asking providers to be more transparent about how reductions in interest rates on variable rate savings accounts are applied the longer a consumer holds the account. This includes displaying prominently the lowest rate of interest any of their customers receives.
  • Requiring consumers to be given clearer, more timely information to help them compare their savings account with alternative products and know how to switch if they want to do so. As part of this, the FCA is not proposing to ban introductory bonus rates because they can benefit some customers, but the FCA does expect providers to improve the way they communicate interest rate changes and bonus rate expiry to consumers.
  • Making it easier to provide a way for consumers to view and manage accounts with different providers in one place.
  • Making the switching process as easy as possible so consumers are not put off moving their money to another provider or to another savings account with the same provider, and a reduction in the current 15 day switching time for Cash ISAs.

The FCA is seeking views on these proposals by 18 February 2015, and will use this feedback to inform any future changes to our rules.

The FCA does not intend to mandate the specific number or type of products that each provider should offer. However, the FCA does note a number of providers have recently simplified their product ranges. Providers that have not yet reviewed their product range should consider whether their current products deliver good outcomes to consumers. 

Notes to editors

  1. The Cash Savings Market Report follows publication of our interim findings in July 2014.
  2. Occasional Paper No. 7: Stimulating Interest: Reminding savers to act when rates decrease.
  3. The Cash Savings Market Study focused on savings accounts that are available to retail consumers in the UK and covered easy access accounts, fixed term bonds, cash ISAs with no term, fixed term cash ISAs, notice accounts, children’s accounts and regular savings accounts.
  4. On the 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
  5. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
  6. Find out more information about the FCA.

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