Banks need to do more to help loyal savers
Published on 17 October 2012 12:01 AM
Banks need to do much more to make saving easier and better value for all customers, especially loyal savers, according to a new older people's savings report published today.
The report has found that many bank customers struggle to find the best account for them and often end up with accounts that pay much less than the best available.
Research from Which? estimates that £12bn is lost to savers every year, because people don't move their money to the best account.
What's more, 67% of savings and investments are held by over-50s, so the lack of transparency means older people are most at risk of missing out on money that they are entitled to.
How bad is the problem?
According to Which?'s research:
- 41% of the 1,800 savings accounts and cash ISAs available to UK savers pay 0.5% interest a year or less
- 2 out of every 5 savings accounts and cash ISAs pay 0.1% interest or less
These figures show that competition is not necessarily having a positive change on the savings market.
Four-point plan of action
Looking at all the research, the report from the All Party Parliamentary Group for Ageing and Older People has come up with four main actions to improve the situation for savers.
- The Government has to make it clear to banks that savings accounts that drop too far below market rates are fundamentally unfair and shouldn't be sold
- The new Financial Conduct Authority should require that banks make savings accounts more transparent
- The Government has to lead on making the whole savings market simpler with fewer products - this would mean they would have to regulate if the banking industry doesn't sort it out themselves
- Savings have to be accessible to everyone and the Government must review the financial services exemption to the ban on age discrimination in goods and services within one year
Why people don't switch accounts
Although it's relatively easy to switch accounts, the report states 4 reasons why people don't move their money to make the most of their savings.
- It's difficult to work out what interest rate you're currently getting on your account
- If you're not online, offers aren't easy to find
- With more than 1,200 different savings accounts out there, the choice is overwhelming
- It's not just the interest rate that needs to be assessed, as many accounts have other features, such as limited withdrawals each year
Michelle Mitchell, Charity Director General of Age UK said in response to the report: 'We support the All Party Group's call that the Government should do more to ensure that saving is made simpler so people can prepare more effectively for their retirement and maximise their income when they do eventually retire.
This is an issue that really matters to older people as they come under ever increasing financial pressure. Loyalty should be rewarded rather than penalised by the financial services industry.'