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Savers missing out on higher returns, says FCA | Savers missing out on higher returns, says FCA |
(34 minutes later) | |
Millions of savers are receiving poor returns because they fail to move their money to new accounts, the UK financial regulator has said. | Millions of savers are receiving poor returns because they fail to move their money to new accounts, the UK financial regulator has said. |
The Financial Conduct Authority (FCA) said banks were paying lower rates to customers who stayed with the same bank for years on end. | The Financial Conduct Authority (FCA) said banks were paying lower rates to customers who stayed with the same bank for years on end. |
It is seeking ideas on how to encourage switching between accounts and to make it easier to compare interest rates. | It is seeking ideas on how to encourage switching between accounts and to make it easier to compare interest rates. |
But the FCA has stopped short of banning so-called "teaser rates". | But the FCA has stopped short of banning so-called "teaser rates". |
These offer a higher rate of return for a limited period. | These offer a higher rate of return for a limited period. |
The FCA also said the big current account providers were able to attract savers, even though they offered lower rates. | |
The regulator found that interest rates on savings accounts opened more recently tended to be higher than those opened some time ago. | |
Savers who opened accounts in 2012 and 2013 received an average return of 0.8%. | Savers who opened accounts in 2012 and 2013 received an average return of 0.8%. |
However, those who had opened accounts more than five years ago, and stuck with them, only received 0.3% in interest. | However, those who had opened accounts more than five years ago, and stuck with them, only received 0.3% in interest. |
'Better deals' | |
In its interim report, the FCA said the big banks and building societies - those with a large share of the current account market - were still able to attract savers, even if their interest rates were not competitive. | |
The FCA analysis shows that for easy access accounts opened in the last two years, the big providers offered an average savings rate of 0.5% per year. | |
Smaller providers offered an average return of 1.2%. | |
"Competition does not appear to be working in the interest of many consumers," said Christopher Woolard, the FCA's director of policy, risk and research. | |
"We want to look more closely at what is inhibiting the majority of customers from getting better deals," he said. | |
The FCA has decided not to take action against so-called "teaser" rates, which offer a bonus rate of interest for a temporary period. | |
It said the use of bonus rates has declined recently, and it concluded that they can encourage switching. | |
The regulator is now asking for further views on the savings market, before publishing its final report later this year. |
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