There are times when I want to run into the street, throw my arms in the air and scream: “Who are these dunderheads who regulate our savings and investments?”
Such an occasion arose with the publication of the FCA’s review into the cash savings market.
The report came out with a number of conclusions which have, for years, been blindingly obvious to anyone with a passing interest in the savings industry.
For instance, money in older accounts earns lower rates of interest than money in newer accounts. Well, fancy that.
I had a chat with Sylvia Morris, the Money Mail journalist who is recognised by many in the industry as knowing more about cash savings than any other independent authority (nobody at the FCA consulted her when preparing this report, naturally).
She has been banging on about this issue for more than a decade.
She points to how banks and building societies can run extraordinary numbers of versions of a single account; each may pay a different rate of interest. Manchester Building Society is on to premier notice issue 41, Saga Telephone is on issue 16 while AA Internet Extra is on to Issue 17.
Savers can find it extremely difficult to work out which rate applies to their money unless they are prepared to wrestle with sometimes impenetrable internet sites.
Surely it would not be difficult to provide the interest rate along with the balance on a paper or online statement.
Surely it would not be difficult to provide the interest rate along with the balance on a paper or online statementAnd would it really be so difficult for a provider to email or text savers when their interest rate is being cut and give details of their best paying similar account?
The stampede for NS&I pensioner bonds shows that savers are switched on and will react to a decent deal that is properly publicised.
To be fair to the FCA, it did get on to this issue not too long after taking over from the inept FSA. And before it can act it presumably has to build a wall of evidence.
But now that it has reached the logical conclusions it must act to ensure this exploitation of cash savers is brought to a halt.
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Don’t allow RPI to R.I.P
Hands up all those who in the 1980s believed we would be going through a sustained period of very low inflation 30 years later?
Actuaries and regulators certainly did not. That is one of the reasons we saw all those silly projections for pension and other investment growth.
Inflation has an impact on all of our financial planning. The difficulty is that even if there is an agreed measure it is merely an indicator. Everyone is affected differently depending on their lifestyle.
The report from the Office for National Statistics, UK Consumer Price Statistics: A Review, is suggesting that Consumer Prices Index plus Housing (CPIH) be adopted as the official measure. Its author, Paul Johnson, director of the Institute of Fiscal Studies, argues that the old retail prices index is flawed.
But inflation is a political issue and changes to the way it is calculated can be very contentious.
If there were a move to CPIH it would need to be seen to be fair to consumers, businesses and the government.
The difficulty will be phasing out the old measures. Surely RPI must be retained for pensions already being paid.
And what about those that have accrued benefits with a promised link to RPI. Surely these must be honoured too.
This change, if it comes, will be far from simple.
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Peer-to-peer lords it over rivals
In the wake of the pensioner bonds issue and the publication of the FCA savings market report, peer-to-peer have been displaying their wares.
One firm, LandBay, which lends to buy-to-let landlords, describes itself as “extremely low risk” and a “better alternative to pensioner bonds” in a press release.
It highlights a 4.2 per cent three-year fixed rate for investors or a tracker, currently offering 3.5 per cent.
But – like all peer-to-peer platforms – it is not covered by the Financial Services Compensation Scheme.
And, as its website confirms, these “should be considered as loan investments, not deposits”.
LandBay has a protection fund, says it conducts comprehensive identity, fraud and credit checks on the borrower as well as performing due diligence on the underlying security property.
It also says its default rate last year was zero and predicts defaults of 0.05 per cent this year.
I have got no argument with peer-to-peer lending for those who understand the risks. But it is an investment not a savings scheme and it should be presented as such.
And I am concerned at any attempt to position itself in a similar category to National Savings, which are simple savings products underwritten by the government.
Tony Hazell writes for the Daily Mail’s Money Mail section.
