FCA floats basic savings rate plan

The Financial Conduct Authority (FCA) has proposed a minimum interest rate for savings accounts to improve returns for loyal savers, according to BBC News.

The FCA has said savers who stay with the same bank or building society for a long time are sometimes penalised by being given poor rates. Some banks pay only 0.05% on instant access accounts.

A Basic Savings Rate (BSR) would apply to all easy access ISA cash products and savings account, applies once the account had been open for a set period, for example one year.

Christopher Woolard, executive director of strategy and competition at the FCA said: “Providers can take advantage of high levels of customer inaction to pay lower interest rates to longstanding customers.”

Citizens Advice estimates that customers lose around £48 a year by now switching accounts.

The FCA has proposed that banks would set their own BSR, which would be featured prominently on their site and materials, allowing consumers to compare rates more easily.

The FCA has attempted to address the problem before, by encouraging customers to shop around and asking banks to share information about how to switch accounts. It has also named and shamed the brands paying the lowest rates, but the problem remains.