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There was a day when managing your savings was easy thanks to that gap under your mattress or that secret place in your bottom drawer only you knew about. You may still remember filling up your bright pink piggy bank and your mother telling you “look after the pennies and the pounds will look after themselves”. However at that time, protection and return will not have been high on either your mother’s or your own agenda. Nowadays for consumers, it is about keeping an eye on the interest you could receive on your money, who you should trust to hold your money, how long you should tie it up for, and how quickly you can access it.
A recent press release from the FCA stated that consumers with cash savings need better information and easier switching. Competition in the £700bn cash savings market is not working well for customers, particularly those with long-standing accounts, and changes need to occur.
The FCA found that £160bn of funds held in easy access savings accounts had interest rates lower than the Bank of England (BOE) base rate of 0.5% in 2013. Despite this, consumers have found it difficult to find out what rate they are on, or are put off switching due to the expected inconvenience.
To combat this, proposed changes put forward by the FCA include:
- Increased transparency regarding how reductions in interest rates are applied, the longer the account is held by the customer
- Clearer and more timely information to help customers compare their savings account with alternative products - with the added knowledge on how to switch if they want to
- Making the switching process as easy as possible so consumers are not put off moving their money to another provider, or to another savings account with the same provider
- Making it easier to provide a way for consumers to view and manage accounts with different providers in, one place
As these changes await industry feedback, we suggest some food for thought. With the increase in technology and reliance on the internet, should savers now utilise online market comparison websites to look for the next best thing? If this is the case, how do we ensure customers read the terms and conditions, and that those who do not fully understand financial products are able to make a sound decision for themselves without guidance?
Would a battle on savings account interest rates create a safe competitive environment for the consumer, and would it also have an adverse effect on the economy? Should long-term savings customers be rewarded with higher rates? If so, why are new customers the ones who benefit the most?
The FCA’s third operational objective is to promote effective competition in the interests of consumers to make markets work well. As such, this evolving area is set to improve the way customers are treated, and with any luck, how they save. This is certainly an interesting time for Huntswood and we will be keeping an eye on how the industry and our clients will be affected by this over the coming months.