It’s good to have a little bit tucked away for rainy days and most of us try to, but is your hard-earned nest egg earning as much interest as it could? Lots of us have savings accounts that were opened ages ago and at the time you probably did your research and compared who gave the highest interest rate for you cash savings and your choice was probably made on who gave the best– job done. But over the years, interest rates change and whilst we’re all getting savvier about switching and saving on our car, home insurance and credit cards – the same probably might not be true for our cash savings accounts.
The sunlight remedy
So, to help us all make more informed decisions and choices about where we stash our savings, the Financial Conduct Authority (FCA) has come up with what they call ‘the sunlight remedy’. It all sounds a bit zen and holistic but bear with us – it’s a bit more practical than it first seems.
The sunlight remedy is, in the FCA’s words to ‘shine a light’ (see what they did there) on how savings providers treat long standing customers. The remedy comes in the shape of some new rules that will make it clearer for customers to identify whether they’re getting the best return on their cash savings products; the rules which come into effect on 1 December 2016, include:
- Banks, building societies and other cash savings providers need to provide key information about financial products in a product summary box at point of sale.
- Providers need to be clear on what interest rate customers are getting – this needs to be given to consumers alongside account balance information in all related communications.
- Giving customers a quicker and easier switching process on their savings accounts. The new rule requires firms to offer a prompt and efficient service so that you can switch to a better account offered at the same company.
Why is this happening?
The FCA believe that customers aren’t being given all the information they need to make good decisions about their savings. All too often, loyal customers who stick with the same provider aren’t getting the best interest rates. The highest rates tend to be used to lure in new customers whilst existing customers end up with their savings languishing at some of the lowest rates on offer.
It’s also about making providers more competitive and less complacent as customers compare the very best deals and that when they find those good deals, switching should be fuss free. Providers will have to provide clear information on the interest rates they offer on cash savings products as well as clearly reminding their customers about changes in interest rates or the end of an introductory rate
So, what does it mean for me?
Ultimately it means that you’ll be made aware of how much interest your savings are earning and if you don’t like it – you can easily do something about it because the FCA are working with providers to deliver seven working day switching for the vast majority of cash ISA transfers from January 2017 – great news for you as the switching process allowing you to get a better deal will be much quicker and easier,.
Get the bigger picture
Of course, when your savings provider sends you information about alternative accounts that could earn you more interest – they’re only giving you one side of the story – theirs. To get the bigger picture, you need to comparethemarket.com and see what everyone else is offering; that way, you could make sure your money’s working as hard as you are to find a better return.