The chief executive of the FCA said a range of issues related to the savings sector would be investigated. These will include evaluating whether competition was working effectively, the effect of so-called ‘teaser rates’ for new savings customers, how often consumers switched accounts and how consumers and firms interacted.
In an announcement on Monday, Mr Wheatley said promoting effective competition was a key objective, and suggested action could be taken against some firms which were found to be treating customers unfairly.
Hinting at consumer inertia on account switching, and overly complicated provider terms, he added: “We know that switching rates are low for financial services products and savings accounts are no exception.
“Even when people do switch their accounts, they are twice as likely to go with their existing provider than move to the offering of a competitor.”
The FCA is also considering launching a market study on annuities and will invite evidence early next year as part of a wholesale strategic review into competition between firms.
Reaction round-up
Independent pensions consultant Ros Altmann welcomed the study. She said: “The savings environment is just dire at the moment. It is essential to continue encouraging people to save.”
Mike Kellard, chief executive of Axa Wealth, said: “Consumers need to think beyond what particular savings account they are going to use and consider whether this is fundamentally the best place for their investments.
“Understanding your risk appetite and investment goals is absolutely vital, while advice is essential to ensure hard-earned money is working for the consumer.”
Peter Davies, founder of Cardiff-based advisory firm Create Wealth, said: “This is well overdue and should have been looked at 20 years ago. The fact that banks can replace existing accounts with new ones and then constantly chip away at interest rates is absolutely disgraceful.”
