By Daniel Hunter
The Financial Conduct Authority (FCA) is to conduct a study into the £1 trillion cash saving sector, assessing whether providers are operating in a competitive market and offering customers quality products.
More than four out of five adults have some kind of cash savings account, yet may not be receiving adequate returns on their savings or getting information they need to meet their requirements.
‘Teaser rates’ is a key area that the FCA will focus on. These are introductory deals that expire soon after the account is opened, with customers’ savings then earning interest at a far lower rate. This practice is believed to be used as relatively few people switch accounts, regardless of the service they receive or the quality of the product they have.
"In looking at cash savings, we will examine an area that affects most people and see if there is action we need to take. This is exactly the sort of area I want the FCA to be operating in,” said Martin Wheatley, chief executive of the FCA.
"We know that switching rates are low for financial services products and savings accounts are no exception. Even when people do switch their accounts, they are twice as likely to go with their existing provider than move to the offering of a competitor."
“Consumers are losing out on billions of pounds from savings languishing in accounts paying poor levels of interest, so we're pleased the FCA has launched this investigation,” said Richard Lloyd, executive director of Which?.
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