FCA sets outs new action plan for cash savings

Following this announcement, the FCA aims to ensure that banks, financial institutions, and building societies are passing on interest rate rises to savers and customers in an appropriate manner, and that they are communicating with their users more effectively in order to provide better savings rate deals. 

The plan follows a review that was made on the cash savings market, as well as a roundtable that was held with banks at the beginning of July. After the review, the Financial Conduct Authority found out that as interest rates on savings accounts have been rising, the process took place more slowly for easy-access accounts. Furthermore, there also has been a significant variance between companies, with smaller firms offering overall higher interest rates on average than other larger enterprises. 

More insights on the action plan

Following the launch of the 14-point action plan, firms that offer the lowest saving rates will be required to justify how those rates offer fair values by the end of August 2023, according to Consumer Duty. If the companies will not be able to offer the justification for their fair value by the end of 2023, FCA will take action. Moreover, the firms will also need to improve their communication with their client base on their options, as well as to measure the effectiveness of their communication campaigns. The FCA clarified how savings providers can inform their users about the best available rates together with the Information Commissioner’s Office, even when the firms had opted out of marketing. 

The focus is also on the benefits that can be offered to users from competitive interest rates, in order to protect the value of their savings and to receive fair value from firms and companies, as required by the Consumer Duty. 

The action plan includes the analysis of the difference between on-sale and off-sale products, which aims to challenge businesses to explain how large differences offer fair value, with the consideration of further action taken if this gap does not continue to close. Moreover, the FCA will also review companies’ performance on cash ISA to cash ISA switching, the manner in which the timing of firms’ savings rate changes each time there is a base rate change, and the effectiveness of their engagement with clients by the end of March 2024, with the possibility to take action if firms have not delivered the outcomes expected and set out by the Financial Conduct Authority. 

The institution will also publish an analysis every six months of companies’ easy access savings rates, with a distribution that lists firms from best to worst. 

Companies are expected to use their fair value assessments of on-sale tools and services in order to assure themselves and the Financial Conduct Authority that these represent the fair value the customers benefit from, take action to prompt their clients in lower-paying saving accounts, as well as non-interest bearing accounts to consider possible alternatives, and closely monitor the effectiveness of user communication (with larger enterprises being required to offer the FCA an evaluation by the end of the year, in addition to any follow-up action that they might take). 

Moreover, firms are required to accelerate their fair value assessments for off-sale accounts before the deadline for off-sale accounts, which was set by the Consumer Duty on July 2024. Client financial resilience will need to be supported as well, and companies will need to encourage customers to start saving and search for high rates in the market (with larger companies being required to support a targeted firm-by-firm communications campaign).