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:
"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."
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.
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