/ Money

Easing the savings trap

Proposals announced today would force firms to give clearer information to savers about the interest rates on their cash savings accounts and when they change – including the end of bonus rates.

A few years ago, I had some extra cash so I found a bank offering what was then a market-leading ISA. So far, so savvy. Feeling smug, and certain my money was working hard, I paid little attention to the account.

Fast forward 18 months and could I tell you what interest rate my ISA was paying? No chance. So I looked for it.

The rate wasn’t on my last statement; nor on my online account. Half an hour later I found it – buried in a hard-to-find page of my bank’s website. My smugness disappeared. The rate had dropped like a stone.

Such experiences were all too common – so in 2014, we launched a campaign to scrap the savings trap. At the time, you told us what you wanted to see.

Among those who commented was Malcolm who said:

‘I want the banks to tell us, with notice, when an account’s interest rate will change, and I would like to see bonus rates that expire after a year stop.’

Well, it looks like the Financial Conduct Authority’s (FCA) been listening – judging by proposals it’s announced today.

What changes are planned for savings accounts?

The regulator will force firms to provide clearer information on the interest rates on their cash savings products, and make them clearly alert customers to changes, including the end of bonus rates.

It’s also making it easier and quicker to switch between providers. No doubt it’s heard horror stories from people who’d tried to switch ISA providers to get a better deal then found it took months, with anxious periods when it appeared as though their savings had disappeared altogether.

Banks and building societies have left customers languishing in poor-value savings accounts for far too long.

Today’s move is a significant win for savers. Many people never switch savings accounts because they think it will make little difference, so it’s good that the FCA has listened to our calls to make savings providers do more to help you get a better deal.

The FCA is also proposing to publish information to highlight firms who pay poor interest rates to longstanding customers.

You might wonder what impact this will have now, when interest rates on savings accounts are pretty pitiful.

But things will improve, and when they do, you should now be a bit more confident that your savings provider, and the regulator, will be doing more to make sure you’re getting a good deal.

What do you think of the planned changes?

Comments

I think this is particularly important for savings accounts because generally statements were not issued frequently and the only information was received once a year in the annual account summary. If this didn’t coincide with the anniversary of opening the account the customer might have been unaware for several months of any interest rate reduction. I just don’t understand why these elementary improvements in customer service have to be forced out of the banks virtually at gun point by the regulator. Or is having a regulator part of the problem? Does it encourage a culture of “we won’t do anything unless the regulator requires it”? On balance I am favour of keeping strong regulation – there is no evidence to suggest that such worthwhile improvements in customer service would have emerged on their own as a result of competition in the market place; when the banks step forward it’s like a line of soldiers doing parade drill [and then they stamp their feet on the spot for five years].

The banks have to be treated like a rebellious 4 year old – i.e. have a big stick (threat) that not only can you use, but you will be very willing to use in response to bad behaviour. When the bank sees easily actioned threat above their heads (or for more impact – above their pay accounts), they keep on toeing the line.

They still think that because the market has risen, this is solely due to the work THEYhave done in the past 6 to 12 months. Thus they deserve the pre crash bonuses that allow they to walk into a car dealership and purchase a brand new Ferrari the following weekend for cash.

Please can the Bank of England & the Treasury change the places for banks to borrow money from so that getting money in from savers is suddenly the cheapest way for them. Then we might get long term decent interest rates from the banks.

I was always under the impression that Banks interest rates were more or less governed by Mark Carney’s regimental soldiers John under the auspices of The Bank of England 🙂 It was announced earler this week that Mark Carney is of the opinion that interest rates may have to rise towards the end of the year when it may prove worthwhile switching accounts to obtain a better deal. Why am I experiencing a distinct feeling of déjà vu?

Yes, interest rates are completely regimented, but unfortunately none of the big banks seem to want to step forward to improve all the other aspects of customer service where, in theory, they have a free hand. Hence, they have atrophied.

Bernard Sabran says:
24 July 2015

Those who offer saving products should know the compagnies they invest into , and have clear strategies for each customer, i.e.: low risk , medium risk, high risk . Most providers take money without having a clue about how it is invested.

Ron Gager says:
24 July 2015

My Halifax ISA dropped to practically zero after a year but they did warn me this would happen. The unethical part about that was the letter came several months before the expiry date and they then refused to let me re-invest it until a week or so before that date. Yes of course they were hoping I would forget to renew didn’t they? As a result they have lost two current accounts, two ISA accounts and a house insurance. I took pleasure in telling the bank manager just why we both departed.

I am in full agreement with the proposals. It is often extremely difficult to find out the interest rates being paid.

Can we add a requirement, please, that all savers should be automatically informed of interest earned and tax deducted, within, say, a month of the end of the tax year? EMF

Frances Heaton says:
24 July 2015

Following the banking crash of several years ago, savers have been given a raw deal regarding interest rates. It seems that we are paying for the gross incompetence of the whole banking industry!

I agree that financial institutions should inform savers regarding change of rates, it is then up to savers to decide whether or not to keep the account, or move elsewhere.

Savers definitely need to be pro-active and prepared to move their money when rates fall at the end of a fixed-term bond maturing. The new rates offered by many providers can be less than half the previous rates offered!

Also, savers need to be aware that the financial compensation scheme will reduce from £85k to £75k from early next year. Many savers will have to check that they will still be covered when the compensation is reduced.

Bill says:
24 July 2015

So many thanks for that heads up on the compo problem, Frances. Something else that the banks are keeping secret, with the full blessings of hm government.

Lily litt says:
24 July 2015

I read about the change in compensation rates in the daily mail money pages. There are some very useful tips there.
As to interest rates, when the Bank of England announces rises, savings rates should go up immediately after all when they go down the savings rates do too!

'Erbert says:
24 July 2015

It’s all very well getting the info from banks etc about rate changes, but overall the interest rates are absolute rubbish. Fine if you have a mortgage, as a saver it’s impossible to keep ahead of long term inflation.
Credit card company interest charges are immoral, when the bank rate goes up I bet they have the cheek to put theirs up too!

The banking industry as a whole is unethical and immoral. ‘Dog-eat-dog’ seems to be their motto. I’m not religious, but remember the story of Jesus overturning the tables of the money-lenders in the temple because of their immoral ethics. Nothing, absolutely nothing, has changed in the banking industry since then. We’ve learned zilch! The ‘haves’ will continue to have and the ‘have-nots’ will continue to be those who supply them with their wealth. History has proved it has been ever thus and will never change, Regulator or no Regulator. Bankers, like ‘the poor’ will always be with us.

David M Smith says:
24 July 2015

Sadly all these comments are true. I had the misfortune to be the Customer Relations Manager for a very large building society in 1993. It was transferring to p.l.c. status and 75% of our serious complaints were about the mistreatment of savers after an initial good interest period. I had the audacity to write a report to my Director saying we could spare the expense of Ombudsmen cases by being more honest to our members. We followed the letter of the regulations, which have since been improved marginally by the three month letter, but banks and building societies still make many millions of pounds by public apathy about switching out of poor paying accounts.

It is high time the interest of the public was put before the greed of the banks. A few new companies are paying some attention to this such as Metrobank and Virgin Money, but most still act in the old way. Needless to say I only lasted another 18 months in that organization before being made redundant. Do leopards ever change their spots?

This will come late to my elderly parents, who I discovered have lost a lot by having their savings account interest rate plummet over the years. They are not “on-line” – indeed, they have struggled to cope with digital TV, so I know the on-line “jungle” is not for them. Hence they were not really aware of what was going on.
Another issue is when banks change your account. My son’s Children’s ISA matured when he reached the age of 18. Did his bank (Nationwide) move him to their best or worst paying adult ISA. Have a guess ?
Yes, they were going to move his funds to an ISA with a very low interest rate. Fortunately we were immediately on the case and moved his funds to the best paying account that was available to him (still, of course, a low rate, but relatively a lot better than the one they proposed). However, I do despair. Why would any bank think that it was a good idea to treat someone who was, in effect, a new customer in this way?

Lynn says:
24 July 2015

Probably not the best place to put this but I would like to say a big Thank you to Which for all their work to bring this about. It is good to have somewhere where our opinions count and are acted upon. Thanks Which.

Michael says:
24 July 2015

I have asked both Halifax and Nationwide to offer savers the opportunity to switch to their best appropriate savings account when the interest rate of existing savings accounts falls on maturity. Both have stated that they do inform customers of rate changes but neither offer this service?
Additionally, it’s always a major exercise to move money around and there’s nearly always a limit on the amount of money you can move at one time unless you pay a fee?
With interest rates at an all time low and banks claiming to be customer focused, they really need to up their game!

Banks will only up their game when their management realise that there is a massive boot aimed for their backside! They are similar to politicians when it comes to doing something that will dent their profits, “All Spin – but No Delivery!”

Michael Emms says:
24 July 2015

If the banks or whoever really needed you as a customer your money would automatically be moved to the best place. You are only wanted so they can get the best out of your money and pay you the least

You have hit the nail on the head with your comment

bobc says:
24 July 2015

The old practice of regarding customers as someone to be looked after and given a good service has gone to be replaced by a attitude of sting the customer for every penny that can be extracted so that the top executives can be paid eye-watering salaries and bonuses.

Peter Forbes says:
24 July 2015

It’s all very well having banks etc required to show true interest rates, but once you have your nest egg what happens.

Just as things are slowly beginning to climb out of the darkness that is recession some “oik” makes the decision to reduce the bank protection limit from £85,000 down to £75,000. This change has been sneaked in, with no great public announcements. Indeed many bank staff know nothing of this change. Given that this government is doing its best to avoid getting involved with the Euro, why oh why should there be a drop in the protection limit – bad show…………………..

James says:
24 July 2015

Unfortunately the ‘oik’ is a Euro ruling. The FSCS cover is 100,000 euros and every 5 years this has to be revalued in line with the exchange rate. The Pound is very strong against the Euro resulting in the change. At least holidays in Europe are good value at the moment.

It may help a little, but unfortunately Banks and Bankers are very “thick skinned” , and to be brutally honest I regret it is unlikely to change the habits of a lifetime, they just love extracting “their pound of flesh” from their customers.
However customers should be more ready to move Banks if there is a better deal

John Schofield says:
24 July 2015

Never forget the basic ethos of banking…to make money!! The customers are there to make that happen via their credit balances and also being charged for their debit balances. We are all profit fodder. (Am I being a little cynical?)

Not cynical at all – perfectly correct

Brian G Rees says:
24 July 2015

If they see no advantage commercial will do what is ultimately best for the Shareholders and Profit share of the senior staff, what gets me is when so-called mutual organisations – most building societies do the same.

janet says:
24 July 2015

It’s very good for them that have saving but I don’t have none so it’s no good to me

Barry J. Webb says:
24 July 2015

Yet another success for ‘Which’, and I feel sure that this will help everyone who is trying to keep up a reasonable income in times like these, especially pensioners and those on fixed incomes, as I am. Thank you once again, ‘Which’, and well done!

Prof. Grumpy says:
24 July 2015

I don’t know why anyone is surprised by the behaviour of the banks. They are in it for themselves and no one else. They treat customers like a ‘Mark’ in a sophisticated scam, skimming every last penny they can and deliver as little as they can get away with. It is about time banks stopped referring to us as ‘Customers’ and used the more accurate term of ‘Victims’. Only then would everyone truly understand where they stand with any Financial Service Industry brand.

A Clements says:
24 July 2015

I’ve already had a letter from Nationwide, warning me that my 5% current account ends in September… so well done them. Sadly, now I need to move banks again – with Nationwide, from September, I’d be getting just 1%

Same here only mine is TSB Cash ISA and come September “down goes the interest rate” and out comes my money and to where? Another headache (I might be tempted to spend it)