The Financial Conduct Authority (FCA) today announced plans to carry out a market study into the £1 trillion UK cash savings market. This study will be part of a programme of work where the FCA will look across financial services markets and assess whether or not competition is working effectively in the best interests of consumers.
The cash savings study will look at a range of issues including the effects of ‘teaser rates’ (the introductory interest rates offered to new customers) and how often consumers switch their savings accounts. Over 80% of all adults in the UK have some sort of cash savings account, so the FCA is keen to assess what it can do to ensure firms offer consumers the best returns possible and information that meets their needs.
Chief executive of the FCA, Martin Wheatley said:
"Promoting effective competition and ensuring that markets work well for consumers is a key objective for the FCA.
"We will be undertaking a programme of work and research that will enable us to have a better understanding of how the markets are working and the dynamics that drive both them and the decisions that consumers make.
"In looking at cash savings, we will examine an area that affects most people and see if there is action we need to take. This is exactly the sort of area I want the FCA to be operating in.
"We know that switching rates are low for financial services products and savings accounts are no exception. Even when people do switch their accounts, they are twice as likely to go with their existing provider than move to the offering of a competitor."
Market studies will enable the FCA to take a holistic look at competition in a market, assessing how consumers and firms behave and interact.
As part of this programme of work, the FCA will consider whether a market study is required on annuities once the thematic review on the subject concludes towards the end of the year.
The FCA will also invite evidence early next year as part of a “Wholesale Strategic Review” to look at the way competition works between firms in financial services to ensure that consumers get a better deal.
Notes for editors
- The FCA has a statutory objective to promote effective competition in the interest of consumers, as outlined in the Financial Services Act 2012.
- The FCA is already undertaking a thematic review into annuities and the impact for consumers if they do not shop around for the best rate. This was announced by the Financial Services Authority in January 2013 and will conclude in early 2014.
- Find out more information about the FCA, as well as how it is different to the PRA.
- The FCA also confirmed Deb Jones and Mary Starks in the role of the new Director of Competition.