Watchdog shelves plans to protect loyal savers
Plans to protect savers and investors from ultra-low rates and investment platform exit fees have been shelved by the financial regulator. The Financial Conduct Authority (FCA) has dropped plans for a single long-term interest rate as a backstop for non-switching savers.
Also gone are proposals to restrict fees when exiting investment platforms. The FCA said the decision came “in light of the ongoing impact of coronavirus and economic conditions”. Savers who leave their money in the same account with one of the major providers can receive as little as 0.1% in interest.
Such low rates can apply to instant access savings accounts, as well as easy access cash Individual Savings Accounts (Isas). Under the plans, firms would have been required to pay long-standing customers the same rate as customers who had recently come off an introductory offer. This would have been known as the Single Easy Access Rate (SEAR).
The FCA said the current economic situation, in which savings rates have been slashed, made this less of a problem. “As interest rates for new products fall, so does the gap between rates paid to new and longstanding customers, and the size of the harm falls,” it said.
Citizens Advice said the FCA needed to ensure the decision was not permanent. “When the single easy access rate was proposed in January, the FCA predicted it would save people £260m a year,” said the charity’s acting chief executive Alistair Cromwell.
“It’s vital the FCA keeps track of how much banks penalise savers just for staying loyal, and it should be ready to implement the single easy access rate when interest rates rise.”
The FCA has also ended a separate investigation into potentially restricting exit fees charged by investment platforms. It said there had been a shift in the market away from exit fees, and it would continue to monitor the situation. Richard Wilson, chief executive of investment platform interactive investor – which charges a flat fee, said: “We are saddened to see this news snuck out. There are still platforms out there that have grown far too complacent, relying on customer inertia and hefty penalties.”