Banks paying paltry interest rates are named and shamed by regulator
Written on 9 December 2015
Banks and building societies that pay little or no interest to loyal savers have been exposed by the Financial Conduct Authority (FCA).
The watchdog has published details of savings accounts that pay just 0.01% interest and accounts closed to new customers which pay no interest at all.
The new research follows the FCA’s findings at the start of the year which showed £160 billion of savings were earning the same or less than the Bank of England base rate of 0.5% and that 80% of easy-access accounts had not been switched in three years.
It says that its publishing this information “to raise awareness of firms’ strategies towards their longstanding customers” and that it “should also encourage firms to offer better value products to existing customers, especially those with products no longer on sale”.
Lowest savings rates
The FCA asked 32 banks and building societies for details of their lowest savings rates. It found that HSBC and First Direct both have an easy access savings account (now closed to new customers) which pays 0% interest. While Danske Bank, Progressive Building Society and Ulster Bank have accounts open to new customers which pay just 0.01% interest*.
While this is just part of the bigger picture of banks’ treatment of their customers, the figures show that some consumers could be better off by choosing a different account, says the FCA.
Help for savers to get better rates
To help savers get a better rate on their savings the FCA plans to introduce a range of measures in December 2016 including:
- Text message alerts to remind savers when their bonus rate is due to end.
- Making it easier for customers to switch to a better account offered by their savings provider.
- Seven working day switching for cash ISAs from January 2017.
- Interest rates displayed prominently alongside account balance information.
- Removal of jargon.
- Better notification of interest rate changes and when bonuses are coming to an end.
- Easy to understand summary boxes with key information to help people compare accounts.
"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,” says Christopher Woolard, director of strategy and competition at the FCA.
Richard Lloyd, Which? executive director, said: "These reforms, when they're eventually in place, should inject some much-needed competition into the market and help consumers move away from savings accounts with dismal rates."
How to get the most from your savings
With inflation running at 0% this means that even if you’re only getting a very low rate of interest on your savings, the buying power of your savings is still growing. But it still makes sense to get the best rate you can for your hard-earned cash.
- Find out what interest rate your savings are getting. Rates are low at the moment but if your savings are languishing in a poor paying account, it’s worth switching.
- Generally non-branch based accounts pay higher rates than branch-based ones.
- Opting for a fixed-rate account could help you get a higher rate but make sure you’re happy to tie up your money for that length of time.
- If your account comes with a bonus, make a note of when it’s going to expire and set a reminder to shop around at that time.
- An interest-paying current account could be an alternative to a traditional savings account.
- Price comparison sites can help you compare the different accounts available or try Which? or Moneyfacts best buy tables.
- Review your savings accounts on an annual basis to make sure you’re still getting a competitive rate.
* Rates at 1 October 2015.