OpinionJul 16 2014

The bad old days look good to today’s savers

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The FCA appears to be on the way to concluding that the cash savings market is not working.

Its interim report on the issue says that many are not getting the best from their savings, while a minority of “very active, very engaged consumers” change regularly to get the best deal.

Many people put their savings with the bank where they hold their current account. These rarely, if ever, offer the best rates.

With the best easy-access accounts paying around 1.3 per cent before tax and most paying far less, this may seem a trivial issue. But it is not.

There is almost £699bn held in savings accounts by the firms in the FCA sample, and 82 per cent of adults hold a savings account. So, for every extra 0.1 per cent earned across the board, another £699m would be paid in interest.

One of the key issues is why so few people move their savings. It may be that some feel it is not worthwhile.

But it is more likely that they do not realise how little they are earning. Banks and building societies are extremely devious in marketing their savings accounts. By having multiple versions of the same account, they can highlight the interest paid on the latest issue, leaving longstanding customers with the impression they are earning more than they really are.

Trying to find the actual interest rate paid for the right issue of an account can be a nightmare; the facts are often buried within their websites.

What’s more, people in rural areas and small communities face discrimination by banks’ emphasis on online banking. Offering the best rates online guarantees a significant proportion of the population will not earn those rates.

It may be that some feel it is not worth while to move their savings

Banks and building societies also make life as difficult as they can for savers by refusing to accept transfers from existing cash Isas on their top accounts.

You have to question the motivation for this. I can see why they might wish to cap the amount invested in each account, but I cannot understand their reluctance to accept transferred money. It almost smacks of a cosy arrangement: we will not steal your customers if you will not steal ours, then we can both go on paying lousy interest rates to existing customers.

Perhaps part of the answer would be to restrict the number of accounts that can be offered, similar to the restrictions imposed on energy companies.

Ironically, most savers seem to have fared better under the 1960s cartel arrangement when one shares rate and one deposit rate was declared by all the building societies.

If most savers reap poorer returns in a free market than under a cartel, then the free market is broken.

Banking chasm grows ever wider

Banks have been leaping onto a report, The Way We Bank Now, published by the British Bankers’ Association.

They have been spouting the statistics showing the huge increase in banking app downloads, the number of times people log in to internet banking and the rise in the use of contactless cards.

We are fast developing a two-tier banking world where the metropolitan ‘haves’ enjoy banking at their fingertips while the rest of the country gradually sees services withdrawn. This has serious implications for all of us.

Try paying for something at a small business in many rural towns and invariably you will have to pay in cash. Payment cards will not work, because the internet does not work – and the banks have withdrawn cheque guarantee cards.

Local branches are closing on the flimsiest of pretexts, leaving customers with further to travel.

The banks are shouting about progress, but the reality is that banking is regressing in some parts of the country.

Mis-selling must be tackled head-on

It is 25 years since pension mis-selling was rife as sharp-toothed salesmen persuaded naïve consumers to swap their final-salary pensions for personal pensions.

Yet, in 2014, we have had both the FCA and the FSCS warn about dodgy advice leading to people moving their money from normal pensions to high-risk Sipp investments.

Those giving bad advice are advertising their services and running businesses in clear view, and action seems only to be taking place after these charlatans have wreaked havoc with people’s pensions.

Something is breaking down somewhere, whether it be reporting from within the industry, a failure by the regulator to act on reports quickly enough or a lack of legislation to shut these firms down once and for all.

Tony Hazell writes for the Daily Mail’s Money Mail section

t.hazell@gmail.com