Savers to be sent switching prompts in crackdown on low rates - here's what's happening

While interest rates on savings accounts have been rising, the FCA is concerned that savers with easy-access accounts are not seeing the benefits of base rate rises, which savings rates can be linked to, quickly enough.

According to its research, nine of the biggest savings providers, on average, only passed on 28% of the base rate rise to their easy-access accounts between January 2022 to May 2023. Meanwhile, smaller firms were found by the FCA to offer higher interest rates on average than their larger competitors.

The regulator says it is "critically important" for the value of people's savings to be protected during the cost of living crisis, adding that it will use new 'Consumer Duty' rules, which come into force today, to ensure providers are offering better deals to savers. Below we explain in more detail what's happening. 

To find the best interest rates on savings accounts in the meantime, see our guide on Top savings accounts. 

Martin Lewis: 'New Consumer Duty rules will hopefully mean savers aren't left languishing on dud accounts'

Commenting on the introduction of the regulator's new overarching Consumer Duty rules on 31 July, MoneySavingExpert.com founder Martin Lewis said on Twitter: 

Providers must take action to ensure savers aren't being ripped off

Savings providers have agreed to a number of new measures to ensure consumers aren't being ripped off, including: 

• Assessing the fairness of interest rates on new accounts by 31 August 2023. The firms with the lowest rates must justify these to the FCA. "Robust action" will be taken against providers that cannot justify their rates. This will be decided on a case-by-case basis but the FCA's regulatory powers include issuing fines and taking away a firm's right to operate in the UK. 

• Assessing the fairness of interest rates on existing accounts by July 2024. 

• Prompting savers with accounts that have low or no interest to consider the alternatives, such as switching to an account with a higher rate. This will take force in the second half of 2023. 

• Encouraging customers to start saving and to search for higher rates with the largest firms committing to support a targeted communications campaign. Providers will also need to consider how they can support savers to access the free advice available from the Government-backed 'MoneyHelper' service. This measure will take force during the second half of 2023. 

Savings rate rises will also be monitored by the regulator

In addition, the FCA plans to:

• Review the timing of providers' savings rate changes when there is movement to the base rate to ensure that any rises are passed on to savers as soon as possible.

• Publish a full list of firms' easy-access savings rates from best to worst.

• Analyse the difference between accounts available to new users versus accounts only available to existing savers, challenging firms to explain how large differences offer fair value and considering further action if this gap does not continue to close. 

The regulator will review the effectiveness of firms' engagement with customers on savings by the end of March 2024 and take action if providers have not delivered the outcomes the FCA has set out.

Make sure you're getting the best savings rate

If you've got savings, check the rate they're paying to make sure you're getting the most interest possible. Most people should be earning at least 4%. So unless your money is locked in... ditch and switch to the top payers:

• Need easy access? You can now earn 4.63%. The top payer is currently Shawbrook Bank at 4.63% (minimum £1,000 deposit). The account allows unlimited withdrawals, but you have to withdraw at least £500 each time.

• Happy to wait to access your cash? Get 5.3%. The notice account from Charter Savings Bank pays the top rate of 5.3% (minimum £5,000 deposit) – but you'll need to give 120 days' notice to withdraw.

• Can you lock money away? Bag 6.05%. App-based Atom Bank offers the top one-year fixed account at 6.05% (minimum £50 deposit) – but in most cases you won't be able to withdraw your money during the one-year term.

Rates change quickly, so keep an eye on our Top Savings guide for the best buys.