Savers may be able to switch cash savings to a new account quicker in future, while providers may also be forced to alert customers to changes in interest rates – something which MoneySavingExpert.com has argued for over the last decade.
Regulator the Financial Conduct Authority (FCA) has today unveiled a raft of proposals aimed at improving competition in the savings market after an investigation found it isn't working effectively for consumers. See the Financial watchdog wants banks to help savers 'shop around' MSE News story for more on this.
Its plans will now be consulted on, with the FCA expecting them to be finalised later this year, and to take force in 2016. Proposed measures include:
- Quicker and easier switching. Introducing a new rule requiring firms to provide a "prompt and efficient" service so customers can switch to a better account offered by the same firm.
- Forcing providers to be clear on interest rates. Firms to make interest rate information more easily accessible, including alerting consumers "more actively" to changes in interest rates, the expiry of a bonus rate or maturity of a fixed-term account. This could be by text, for example.
- Removing complex jargon and helping customers understand their options. Firms to provide savers with easy-to-understand information to help them compare accounts.
- Making it clear which firms pay the lowest rates. The FCA to publish information highlighting firms that pay poor interest rates to longstanding customers. The consultation will look at where this information will be published eg, on statements or in branches, for example.
- Seven day switching for cash ISAs from 2017. The FCA is also working with the industry to deliver seven day switching for cash ISA transfers to and from the major providers. Current guidelines state this should take no longer than 15 working days.
'Start being a savings tart now'
Martin Lewis, founder and editor of MoneySavingExpert.com says: "It is staggering that it's taken this long before someone finally tells banks they need to clearly tell customers what interest rate they're getting on statements.
"We've been arguing for this for nearly a decade and have heard pitiful excuses over the years such as 'we don't have the technology', a staggering piece of nonsense considering they can tell you how much interest you earn, but not the rate used to calculate it.
"Of course a clarity over interest rates will leave many people shocked about the spitworthily low rates they are achieving. Hopefully that in itself will encourage them to act.
"Yet what people want is a place to put their cash, so it earns decent interest for the long term and they can access it when they need. Yet frankly that doesn't exist.
"The only way to earn real savings interest is to be a savings tart – chucking what you've got where it pays best and disloyally moving your money again and again to ride the wave of best buys. Do that right now and interest as high as 6% is possible, not the paltry sub 1% rates most people are earning."
'Savers should be able to switch with minimum fuss'
Christopher Woolard, director of strategy and competition at the FCA, says: "In a good market, providers should be competing to offer the best possible deal. Consumers should expect the information they need to shop around to be clear and easy to understand.
"When they wish to move accounts, they should be able to do so with the minimum of fuss. Our package of measures are all about giving consumers the information they need to make an informed decision about what to do with their savings, and the ability to act on it quickly."