It is a commercial world out there and I can think of no other industry that has a regulatory insistence that charges for what they make/ build/ sell have to be declared with such granularity.
Not content with that, there is now an FCA move to get savings ‘providers’ to do something about what they pay savers.
Savers rates are rubbish.
They are marketed offering short term gains as if it were manna from Heaven, implying great returns, but the crazy conditions and account charges often do not stand up to close scrutiny.
To suggest that higher rates of interest should be paid to easy-access saver accounts and cash Isas is no bad thing but I was not aware that it was the FCA’s role to determine or influence what is a commercial decision.
Savers can switch accounts easily, but because interest rates are so low, account conditions confusing at best and the gain is so minimal it is hardly worth the bother.
Regulation has created a race for the bottom on price; now it is trying to create a race to the surface with savings rates. In fact I would suggest that changing mobile phone contract, utility supplier, motor insurer etc, would produce greater returns on a simple pound-cost analysis.
Savers today are busy subsidising those so-called ‘hard-pressed families’ who are being punished by low inflation and low mortgage rates.
Mortgage rates are at their lowest and have been for so long that paying higher interest rates by the mutual providers in particular would see higher mortgage rates.
Savers are a tax opportunity; borrowers are not.
Most savers are older, they are not as politically important as they were, so governments hit savers badly at the expense of borrowers.
Perhaps it would be better if the government allowed cash savings to be completely tax free. Those with money to save would see a big benefit as they will mostly be higher-rate tax payers.
The FCA is trying to do something it should not be doing.
Savers could benefit from lower regulatory costs and intervention. I have not done the maths but I would be surprised that if the costs of regulation for savings providers could be halved, interest rates could be doubled based on todays rates.
Cost is something that FCA regulation incurs for firms, often with little thought of logic or affordability and with little benefit analysis being done on the consumer impact or detriment it created.
Regulation has created a race for the bottom on price; now it is trying to create a race to the surface with savings rates. A nice idea but poorly thought through.
Derek Bradley is founder of PanaceaAdviser
