The UK’s Financial Conduct Authority (FCA) has today proposed a fixed % rate amendment further regulating the ‘easy access cash savings’ market and its related incumbents.
A popular banking service, easy savings accounts are offered to customers as a flexible savings account withdrawn from fixed standard requirements, allowing consumers to freely deposit and withdraw from their savings.
However, the FCA previously raised concerns that UK consumers taking on easy savings accounts were being serviced with lower % interest rates on their savings and further unsatisfactory outcomes.
Seeking to align easy savings accounts with traditional savings modules, the FCA has sanctioned that all UK banks and financial institutions will have to set a single easy access rate (SEAR) across their easy savings portfolios.
Allowing for market competition, the FCA will allow incumbents flexibility on introductory % rates offered on the first 12-months of their accounts. However, banks will have to then define and stick to set SEAR rate on accounts, with the FCA estimating that consumers will benefit by circa £260 million from higher interest payments.
Having previously reviewed the market, FCA research department detailed that around 40 million UK easy saving consumers were being underserved by the market.
Leading the planned reforms, Christopher Woolard, Executive Director of Strategy & Competition at the FCA said:
‘Competition is not working well for many consumers with easy access savings accounts and we want that to change. Our proposals would mean firms have a single rate for customers immediately after their accounts have been open for 12 months. Firms will choose the rates they offer, and the rates they offer will have to be clearly published.
‘This will prevent firms from gradually reducing interest rates over time and make them compete for all their customers. We are concerned that many longstanding customers are seeing a poor outcome and we want firms to focus more on these customers. The new rate will also make it easier for savers to know whether they are getting a good deal after any introductory offer has expired.’