Banks and building societies paying loyal savers interest rates as little as 0.01 per cent or even zero have been named and shamed by the City watchdog to encourage customers to switch.
The Financial Conduct Authority (FCA) revealed accounts from 32 providers paying poor rates of interest to customers after findings at the start of the year showed £160 billion of funds were earning the same or less than the 0.5 per cent Bank of England base rate.
It exposed cash savings accounts and individual savings accounts (ISAs) that pay as little as 0.01 per cent, while accounts with HSBC and First Direct that are now closed to new customers and cannot be managed via a bank branch pay zero interest.
Experts said the results are a “wake-up call” to savings providers who leave customers in “zombie accounts” that pay paltry returns – effectively leaving them out of pocket once inflation is taken into account.
The FCA said it wanted to “shine a light” on treatment of long-standing customers and encourage banks to offer better value accounts.
The first so-called “sunlight” study from the FCA comes as part of a raft of measures to make it easier for savers to switch and compare. FCA plans to make it easier for savers to seek better returns also include text message alerts for when an introductory rate is to end.
A new rule will force firms to offer prompt switching to better accounts offered by the same firm, while, from January 2017, it will launch seven working day switching for cash ISA transfers.
Christopher Woolard, director of strategy and competition at the FCA, said: “With many savers never switching because they don’t think it will make a difference, our rules will help consumers get the information they need to shop around.”
The watchdog will publish its “sunlight” information every six months for a year and a half as part of the trial.