The Financial Conduct Authority (FCA) has suggested that banks may be required to set a minimum interest rate for some of their savings accounts under new rules it is considering.
The new move comes following growing concern that many savers are getting a poor return on their investment from their bank, as they are often staying with the same bank or building society for a long time on poor saving deals.
As an example, some banks only offer an interest rate of just 0.05 per cent on their instant access products.
Under the FCA proposal, the Basic Savings Rate (BSR) would apply to all easy access cash ISA products, as well as savings accounts and would be applied to the account after they have been opened for a set period of time.
Christopher Woolard, Executive Director of Strategy and Competition at the FCA said: “Providers can take advantage of high levels of customer inaction to pay lower interest rates to longstanding customers.
“Efforts to encourage customers to switch have had limited impact and we remain concerned about the way firms are treating customers.
“This is why we are considering the introduction of a basic savings rate for older accounts, which would promote competition and help get customers a better rate of interest.”
He believes that instead of being punished for their inaction or failure to shop around, savers should be treated fairly by banks and building societies.
According to the proposal, it would be down to each bank to set their BSR, which would have to apply to all instant access accounts and would be published by the FCA, so that consumers could easily compare the different deals on offer.
Savers lose around £48 a year on average by not regularly switching, according to Citizens Advice.
However, despite these claims, many of the banks likely targeted by the proposals said they had already taken measures to improve competition in the savings market.
Peter Tyler, Director of Conduct and Savings Policy at UK Finance – the body that represents high street banks – said: “These include communicating more clearly with customers about the rates they receive, faster cash ISA transfers and enhanced customer prompts before a rate is reduced.”