A MAJOR rule change means banks and building societies have just weeks to tell customers their savings are earning next to no interest.
More than £250billion is currently sitting in savings accounts which earn no interest, Bank of England data shows.
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Until now, providers haven’t had to contact customers to tell them they could be earning a lot more just by moving their cash to a better savings rate.
But today the Financial Conduct Authority (FCA) has told providers to contact all their savings customers by September 30 or face paying a fine.
It means savers who haven’t moved accounts recently could be in line to get a big hike in their interest rate.
Higher savings rates mean your provider must pay you more interest.
If you have £1,000 in your account and it’s paying 0.1% interest, at the end of the year you’d earn £1.
But by moving to the best buy easy access savings rate, currently from Secure Trust at 4.55%, you’d get £45.50 interest after a year.
Another rule change announced today will also force banks and building societies to pass on higher interest rates to savers quicker.
The Bank of England base rate is currently 5%, following a string of increases, and there are expectations that it could rise again on Thursday.
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However, there have been concerns that providers have been raising borrowing costs at a much faster pace than savings rates have increased.
According to figures released by Moneyfactscompare.co.uk on Monday, the average two-year fixed homeowner mortgage rate on the market is 6.81%, while the average easy access savings rate is 2.78% and the typical one-year fixed savings account has a rate of 5.19%.
The FCA’s plan follows a review of the cash savings market and a meeting held with banks in early July.
While interest rates on savings accounts have been rising, this has been happening more slowly for easy access accounts.
Companies offering the lowest savings rates will be required to justify why by the end of August.
Harriett Baldwin, chairwoman of the Treasury Committee, said savers should still shop around between providers for the best rates.
“But loyal savers should not be penalised,” she added.
Myron Jobson, senior personal finance analyst at interactive investor, said the city watchdog is “cracking the whip” to give customers a fair deal on savings products.
“Paltry savings rates offered by leading banks are a bitter pill to swallow for savers whose wealth is being eroded by a double whammy of inflation and rising borrowing costs,” he said.
The big banks contacting customers
Some of the biggest providers have already started to contact savers who could earn more interest by switching.
Lloyds Banking Group said it’s reaching out to over 10million customers over the course of the year to let them know about their options, and highlight if they could benefit from a better savings rate.
This includes a campaign targeted at around 2.5million customers whose activity suggests they could benefit from changing their savings account to get better rates.
HSBC also said it’s already proactively informing customers of rate increases.
It’s reminding customers of the need to review their savings, and highlighting products that might also be suitable for them at a higher rate, taking into account their account behaviour.
These come in the form of pop-up messages when using the mobile app or online banking, on top of direct communication like emails.
Meanwhile, a Barclays spokesman said: “From July 4 we have been targeting around 1.3 million customers to inform them of the accounts we have designed to play different roles in helping to achieve their savings goals.
“With just a few taps on the Barclays app, customers can open a Rainy Day Saver at 5% and/or a Blue Rewards Saver at 3%.”
How can I find the best savings rates?
With your current rates in mind, don’t waste time looking at individual banking sites to compare rates – it’ll take you an eternity.
Research websites like MoneyFacts and price comparison websites such as Compare the Market, Go Compare and MoneySupermarket will help save you time and show you the best rates available.
These sites let you tailor your searches to an account type that suits you.
It’s also worth considering opening an Individual savings account (Isa).
These can pay high interest but come with high withdrawal fees and are unlikely to be beneficial if you’ve less than £65,000 in savings.
However, Lifetime Isas are great for anyone aged 18-39 hoping to buy a house or save for retirement.
