Savers losing out by failing to switch - Savings - News - Moneyfacts

News

Savers losing out by failing to switch

Savers losing out by failing to switch

Category: Savings

Updated: 09/07/2014
First Published: 09/07/2014

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

It hasn't exactly been a good time for savers of late. Rates have been on a downwards spiral and only seem to be falling further, but it seems that a lack of engagement – and competition – could be to blame.

According to an investigation from the Financial Conduct Authority (FCA), savers have been getting poor returns on their cash savings by not shopping around for a different account. Banks feel able to pay low interest rates to customers that have had the same account for several years as they're not compelled to offer anything better, meaning a lot of comfortable savers will be getting truly paltry returns.

Not only that, but the report found a clear lack of competition in the sector too, with the UK's largest current account providers able to attract the majority of easy access savers despite typically offering lower rates. It seems that a big name will attract attention, and savers, more than a smaller provider – no matter how little they're offering.

Christopher Woolard, director of policy, risk and research at the FCA, commented: "Our preliminary view is that while some aspects of the cash savings market are working well, competition does not appear to be working in the interest of many consumers. In this market there is a minority of very active, very engaged consumers who regularly change provider to get the best deal. We want to look more closely at what is inhibiting the majority of consumers from getting better deals."

The FCA will undertake further research before deciding whether it should intervene to ensure competition is working for customers, as well as considering how it might be able to promote greater consumer engagement. It's hoped that the research will "find a market in which informed consumers are able and willing to take advantage of the best products for them, with firms actively competing to win business by improving the products they offer," with further investigations set to identify:

  • what could be done to ensure that more consumers are aware of the rates they receive and those on offer elsewhere;
  • what information customers are given when rates are changing;
  • whether it's possible to give consumers greater insight into how their interest rate is likely to evolve, especially after any introductory period ends, so they can make an informed choice between providers;
  • what could be done to make it easier to move savings to a new provider; and
  • whether other interventions may be necessary to improve outcomes for customers overall.

"It is not before time that the regulator should step in to ensure fair play," said Sylvia Waycot, editor of Moneyfacts.co.uk. "For too long savers have had to suffer whatever paltry rates are offered to them.
This is a great opportunity to put faith back into the savings market, to make it worthwhile and, most of all, rewarding."

The FCA's final report into cash savings is set to be published later in the year, but in the meantime, what can you do to make the most of your cash? Shop around! It's the solution to so many financial matters and can make all the difference to your savings pot, ideally leaving you with a real rate of return rather than an account that gets eroded by the likes of inflation.

Our best buy tables give you the pick of the best savings accounts, whether you're looking to lock your money away in a fixed bond, have an easy access account or maximise your tax efficiency with an ISA. Rates may not be setting the world on fire but there are still great deals to be found, and after all, even small returns can soon add up.

For the time being it's all about arming yourself with the knowledge you need to make the right decision, although it's of course hoped that the investigation will lead to something of a change in the savings market to give more choice – and better rates – to consumers.

Ms. Waycot concludes: "We all have to accept low interest rates when the Bank of England rate is so low, but there is no need to offer savings accounts that shift and change rate after a 'specified' time period that is designed so it's hard to remember. We shouldn't have to be cunning to get the best rate and it shouldn't be a reward for the most observant fan of T&Cs. Saving is a straightforward concept and the accounts should be straightforward too."

What Next?

Compare the best savings accounts in our best buy charts

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

Related Articles

Savings being used as a festive financial buffer

Good news from RCI Bank UK – its latest research shows that many of us are saving more than we were a year ago, but the question is, will you be dipping into that buffer to cover the cost of Christmas?

6 of the best easy access savings accounts

Easy-access savings accounts are as simple as they sound – they allow you to access your money whenever you need it, without having to give advance notice, and they also allow you to pay into them at any time. Here are six of the best.

Start saving for Christmas… 2017!

Christmas is just around the corner and our annual festive splurging is starting to step up, but are you prepared? It may be too late to start saving for this year’s festive spend, but it’s never too early to start for next year’s!
 
Close