The basic savings rate, first suggested by the Financial Conduct Authority (FCA) in July, could introduce a minimum interest rate across savings accounts. With many savers keeping their pots in the same low-paying savings account, this could provide a boon to the market. However, more than half (59%) of savers don't think this measure would go far enough.
According to a survey by Ford Money, 67% are worried that if banks are able to set the rate themselves, it would likely be too low to make any difference. At the same time, a significant 78% of savers feel that banks are using their customers' loyalty against them by paying lower rates.
"The savings industry needs a shakeup and to do its part to recognise loyal savers," Suzanne Lewsley, chief deposits officer at Ford Money, agreed. "It shouldn't rest solely on regulator interventions for the industry or savers to act with their feet to acknowledge and reward long-time customers with fair rates."
One non-regulatory solution that particularly appeals to those surveyed is for banks to pay new and existing customers the same interest, favoured by 46%. Meanwhile, 32% think the FCA should have some control over the difference in rates between new and existing customers' accounts and 45% believe the basic savings rate should be set at the same level as the Bank of England base rate, which currently stands at 0.75%.
We've reported previously that many accounts on the market – especially easy access accounts – have rates that pay less than base rate. And yet, a lot of savers seem content to stick with them, as the data further revealed that over half (54%) have held their main savings account for more than five years now, with 32% unlikely to switch in the next year. A concerning 27% even said they've never switched to a new savings provider.
The basic savings rate may not be as successful in combating this apathy as the FCA predicts, either, as 45% said they would actually be less likely to switch to a more competitive deal if they think they're already getting a good return on the basic savings rate. This may be why Yorkshire Building Society is suggesting that any account offering less than a certain rate should no longer be considered a savings account.
"We need to do more to create a 'save first' culture – the benefits of doing so would be felt by individuals and society as a whole," commented Mike Regnier, chief executive of Yorkshire Building Society. "Labelling accounts which are specifically designed for long-term savings rather than day-to-day spending could help encourage that change in perspective and we believe it is worthy of further investigation."
As remarked by Suzanne Lewsley, we can't rely solely on regulation to make us aware of better savings rates. Of course, if you've found your way to Moneyfacts.co.uk, we probably don't need to remind you of the benefits of shopping around to find the best savings deal.
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.