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FCA to change savings account market


The Financial Conduct Authority has found that competition in savings accounts does not work out well for customers, particularly those with long-standing accounts.

The regulator believes it should be easier for consumers to compare cash savings accounts and then switch providers if they choose. They have found that consumers often find it difficult to find out what interest rate they are on, and are put off switching by the inconvenience.

£160 billion of the funds held in easy access accounts earned interest rates equal to or lower than the current Bank of England’s base rate, 0.5%, and 80% of these accounts have not been switched in the last three years.

The FCA are calling for banks to give clearer information to consumers about interest rates and switching accounts. They have set out a number of changes to the cash services market to address these concerns, such as:

• Asking providers to be more transparent about how reductions in interest rates on variable rate savings accounts are applied.
• Requiring consumers to be given clearer, timelier information to help them compare their savings account with alternative products.
• Making it easier to provide a way for consumers to view and manage accounts with different providers.
• Making the switching process as easy as possible for consumers.

They decided not to ban bonus rates, which are used to tempt potential customers and then are taken away after a certain amount of time.

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."

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