There have been concerns about the level of competition in the savings market for some time – quite simply, there hasn't been much, which has led to poor rates and a poor deal for customers. Well, the Financial Conduct Authority (FCA), the regulator of the financial services sector, has stepped in, and change could be on the cards…
The regulator has just announced measures designed to improve competition and ultimately benefit those with cash savings accounts, by "encouraging easier and quicker switching and improving the information savers receive". In a nutshell, the rules mean that, from December next year, firms will have to provide clear information on the interest rates offered on their savings products, and will also need to specifically remind consumers about any change in the rate or if the account has reached the end of an introductory/bonus period.
In addition, the FCA has published data on the lowest interest rates offered for the first time, highlighting the poorest 32 providers of easy access savings accounts and easy access cash ISAs. The aim of this "is to shine a light on those firms' strategies to longstanding customers", it said in a statement, which will ultimately flag up those providers who should be given a wide berth – which may in itself encourage competition, as no provider will want to lose customers.
The finalised rules will come into effect on 1 December 2016, and they've been broadly welcomed by the industry and consumers alike. Danny Cox, chartered financial planner at Hargreaves Lansdown, said that the move is "a wake-up call to the banks and building societies that are turning a blind eye to savers who are left abandoned in zombie accounts", as the rules will help people compare interest rates and make it easier for them to switch.
Christopher Woolard, director of Strategy and Competition at the FCA, said that the rules will "help consumers get the information they need to shop around", as currently, many savers never switch because they don't think it will make a difference. The rules will hopefully change all that: "In a good market, providers should be competing to offer the best possible deal," added Woolard, "and should a consumer wish to move accounts, they should be able to do so with the minimum of fuss. Our rules are about giving consumers the facts they need to make an informed decision about what to do with their savings, and the ability to act on it quickly."
This is just the beginning, too, as the FCA is also working with the industry to deliver seven-day switching for the vast majority of cash ISA transfers from January 2017. This will bring ISA switching in line with switching current accounts, which should make the process far quicker and simpler – and with less hassle involved, it may encourage more people to compare the options and switch.
Hopefully, the focus on competition will even encourage providers to offer better rates, for if consumers can clearly see they could be getting a better deal elsewhere, they could be tempted to switch.
However, as Danny Cox points out, "change in the market is still at least a year away, and in the meantime apathy is the savers' enemy when it comes to getting the best from cash. Despite interest rates being at record lows, savers can still make more of their cash by regularly reviewing the interest rate and switching from poorly paying accounts". So what are you waiting for?! Don't wait for the new rules to come into force – compare savings accounts today, and see if you can find a better rate.
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.