City watchdog reveals savings accounts paying lowest rates of interest


Savings accounts paying the lowest interest rates have been laid bare by the City watchdog as part of a raft of measures to make it easier for savers to switch and compare.

The Financial Conduct Authority (FCA) revealed accounts paying poor rates of interest to long-standing customers from 32 banks after findings at the start of the year showed £160 billion of funds were earning the same or less than the 0.5% Bank of England interest rate.

It also found in January that older accounts, representing a significant chunk of the £700 billion market, tended to have lower rates than those more recently opened.

FCA plans to make it easier for savers to seek better returns also include text message alerts to remind them when an introductory bonus rate is due to end.

And a new rule will force firms to offer prompt and efficient switching to better accounts offered by the same firm, while, from January 2017, it will launch seven working day switching for cash ISA transfers.

Christopher Woolard, director of strategy and competition at the FCA, said: "With many savers never switching because they don't think it will make a difference, our rules will help consumers get the information they need to shop around.

"In a good market, providers should be competing to offer the best possible deal and, should a consumer wish to move accounts, they should be able to do so with the minimum of fuss."

The FCA's so-called sunlight data shows that some easy-access cash savings accounts and ISAs pay as little as 0.01%.

The watchdog will publish this information every six months for a year and a half as part of the trial.

The measures, which will come into effect from December 2016, are being planned after a market study found that, for many consumers, competition was not working as effectively as it could be.

The regulator stopped short of banning introductory bonus rates, as it believes they may benefit some customers, but said earlier this year that it did expect providers to improve the way they communicate about interest rate changes and when the bonus rate expired.

It also wants firms to strip out complex jargon and give customers easy-to-understand key information to help them compare savings accounts, by providing summary boxes, according to the FCA.

Banks will have likewise have to display interest rate information prominently alongside account balance information in all rate-related customer communications.

Its findings published in January this year revealed that many consumers found it difficult to know what rate they were on or were put off switching by the expected inconvenience.

It found 80% of easy-access accounts had not been switched in the last three years.