The Financial Conduct Authority (FCA) has today announced plans to investigate the £1 trillion UK cash savings market.
The study will form part of a programme of work where the FCA will look at a range of financial services markets and assess whether or not competition is working effectively in the best interests of consumers.
‘Teaser rates’ to be addressed
Over 80% of all adults in the UK have some sort of cash savings account. The FCA wants to ensure that firms offer consumers the best returns possible and information that meets their needs.
The cash savings study will look at a range of issues including the effects of ‘teaser rates’ (introductory interest rates offered to new customers) and how often consumers switch their savings accounts. The regulator will then decide if there is any action it needs to take.
A survey of more than 6,000 Which? members at the end of 2012, revealed that more than half think bonuses should be removed in favour of more consistent interest rates, even if this means slightly lower rates overall.
FCA considers annuity market study
Martin Wheatley, chief executive of the FCA, said: ‘Promoting effective competition and ensuring that markets work well for consumers is a key objective for the FCA.
‘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 FCA is already carrying out a thematic review into annuities. As part of the new programme of work, it will decide whether a market study is required on annuities towards the end of the year.
Which? welcomes savings review
When Which? launched its Great British Savings Campaign back in 2010, we found that savers were missing out on a shocking £12 billion in interest because their accounts were paying them miserly rates as low as 0.1%. When we updated our investigation last year, we found that this had increased to £12.8 billion.
Which? executive director, Richard Lloyd, said: ‘Consumers are losing out on billions of pounds from savings languishing in accounts paying poor levels of interest, so we’re pleased the Financial Conduct Authority (FCA) has launched this investigation.
‘We also want the FCA to look specifically at zombie accounts that lure people in with high introductory rates which then drop down to often very poor rates of interest.’