Introductory rates on savings accounts to be investigated
09/09/2013
So-called ‘teaser’ rates on cash savings accounts are to be investigated by the Financial Conduct Authority (FCA).
The headline rates are put on savings accounts to attract consumers, but usually only last for a specific period of time, usually a year. After this initial period the rates fall, sometimes significantly, leaving savers earning a poultry amount of interest on their money.
The FCA has now said that it will launch a review into these headline rates, after saying lenders are “taking advantage of customer inertia”.
Around eight out of ten adults in the UK have a savings account to their name, and cash savings are a popular choice; offering a guaranteed interest rate and little risk to savers.
The FCA has been keen to confirm that this review is not based around mis-selling, and is not an investigation into the actual products.
Instead however, it is a case of taking advantage of consumer behaviour. Providers know that few customers are likely to move their money once the headline rates finish, so offering an attractive rate for a set period of time becomes worthwhile.
Martin Wheatley, Chief Executive of the FCA, said: “Promoting effective competition and ensuring that markets work well is a key objective of the FCA.
“In looking at cash savings, we will examine an area that affects most people and see if there is action we need to take. 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”.
The review is expected to be concluded in 2014.
Share this..
Related stories
Will we see a reduction in the number of UK building societies?
As further news regarding the West Bromwich building society continues to hit the markets there is a growing consensus that the building society sector we have today will be very different in 12 months time. While the West Bromwich is by far and away the most serious of the current issues ongoing, there are many other smaller operations who are struggling to make ends meet. So where can they go fr...
Read MorePensioners will not blow their savings on "luxuries"
13/04/2015 Only 1% of those aged 50-75 years old have claimed that they will spend their pension pot on luxuries, according to a report from commercial firm Price Waterhouse Coopers (PwC). Savers over 55 years old can now access their pension pots in full, thanks to the new pension reforms. However, experts have expressed concerns that many could blow their money on luxury items, leaving th...
Read MoreWill Northern Rock savers jump ship?
As we mentioned earlier today, the UK government's 100% guarantee on deposits held with Northern Rock will be lifted on the 24th of May as the "good bank" is positioned for sale to the private sector. The lifting of the 100% guarantee has been welcomed by banks and building societies in the UK who had complained that Northern Rock was in a stronger position than the rest of the sector, which had t...
Read MoreBank employee took £40,000 from customer account
It has been revealed that an employee of HSBC was involved in a fraud which saw £40,000 taken from the savings account of Leonard Poole, an older gentleman who suffers from dementia, over a nine-month period. While the situation was thoroughly investigated by HSBC and all funds returned to the party in question, it does highlight the difficulty of running bank accounts for those people who suffer...
Read MoreUK Savings Are Disappearing Fast!
Unlike the Prime Minister there are many people in the UK who saved up substantial nest eggs in the recent boom times although many are now finding it very difficult to keep hold of their savings. Reports in the financial press have suggested that mortgage payments, credit card bills and the general cost of living are seeing more people dipping into their savings. But what happens when their sav...
Read More