In January 2015, we published the final findings of our cash savings market study and our proposed remedies. The findings set out our conclusions on the effectiveness of competition in the cash savings market. Our remedies set out how we intended to intervene in the market to make competition work better for consumers.
Scope and our approach
We focused on interest-bearing cash savings accounts. We covered seven main types of savings accounts – easy access accounts, fixed term bonds, cash Individual Savings Accounts (ISAs) with no term, fixed term cash ISAs, notice accounts, children's accounts and regular savings accounts.
We gathered evidence by collecting and analysing data from firms, requesting views from stakeholders, commissioning a consumer survey[2], conducting a randomised controlled trial[3] and commissioning a report on international comparisons[4].
Our final findings
The cash savings market is not working well for many consumers:
- Providers have significant amounts of consumers' savings balances in accounts opened more than five years ago, yet these accounts pay lower interest rates than those opened more recently.
- Providers need to improve the transparency of their practices as little information is currently being given to consumers about alternative products.
- Consumers are put off switching by the expected hassle and perceived low gains from opening another account. 80% of easy access accounts have not been switched in the last three years.
- The large personal current account providers have considerable advantages because they can attract most easy access balances despite offering lower interest rates.
Our proposed remedies
We proposed remedies in four main areas:
- Giving consumers sufficiently clear and targeted information at the right time so that they can easily and quickly compare their savings accounts with alternative ones and know how to switch if they want to do so.
- Making the switching process as easy as possible so that it does not put consumers off moving their money to another savings provider or to another savings account with the same provider.
- Removing some of the advantages of the large providers by making it easier for firms to provide a way for consumers to view and manage accounts with different providers in one place.
- Being more transparent about the way in which providers are reducing interest rates on variable rate savings accounts the longer a consumer holds the account.
Next steps
We issued a Feedback Statement and Consultation Paper[5] summarising the responses we received on our proposed remedies and consulting on rules and guidance to take some of these remedies forward. We released a Policy Statement[6] in December 2015 which made these rules and guidance provisions final (with minor changes to reflect feedback from respondents). Alongside the Policy Statement in December 2015 we published the first of three sets of data as part of our 'sunlight remedy[7]'. In July 2016 we published an update on our work[8] together with an Occasional Paper[9] setting out the results of some real-life testing of certain other remedies proposed in the market study. We also published the second set of data as part of our sunlight remedy.
In December 2016 the new rules and guidance mentioned above came into force covering:
- Disclosure – aimed at improving the information made available to consumers by firms, both at or before the point of sale and post-sale. Firms will have to provide a snapshot of account information - a summary box of the main features of the product. We have also made improvements to the presentation, frequency and timing of customer communications,
- Switching – to make switching easier. We have introduced new provisions to help customers switch accounts offered by their existing provider more easily. We have worked with industry to speed up cash ISA transfers. Industry has agreed that from January 2017 a minimum of 80% of cash ISA transfers will be carried out within seven working days. They have also committed to carry out a study on improving this further.
In December 2016, we also published the third set of data as part of our sunlight remedy. We will now evaluate this trial and as part of this will consider what other regulatory tools are needed to achieve more effective competition.
Find out more
For more information see:
- Optimisa Consumer Research[10]
- Occasional Paper 7: Stimulating interest: Reminding savers to act when rates decrease[3]
- GfK Financial - Cash Savings: Technical report[2]
- PwC: Cash Savings - An Cash Savings - A study for the FCA[4]
- Interim report[11]
- Terms of reference[12]
- CP15/1: FCA Competition Concurrency Guidance and Handbook amendments[13]