Revealed: how the savings market is failing consumers

In the most comprehensive analysis of the cash savings market ever, Which? reveals the full extent of how some providers are failing consumers and leaving them with next to no return on their money. 

While there have been improvements from a handful of providers, our new report – The Savings Trap – is a damning indictment of the systemic failings and poor practices in this market that distort competition and make it difficult for people to know whether they are getting a good return on their savings.

We found a wide range of problems including:

  • Confusing account names: A number of the accounts have high-value sounding names but pay pitifully low rates of interest, for example, in May 2014, Cambridge Building Society’s ‘Instant Sapphire’ and Halifax’s ‘Liquid Gold’ both paid 0.05%.
  • ‘Zombie’ accounts: Despite the fact that there are over 2,000 savings and cash ISA products available, 39% of these are ‘zombie’ accounts closed to new customers and paying low returns. The number paying 0.5% or less has almost doubled since 2010, and those paying 0.1% or less has increased by a third. Consumers stuck in these are losing out by £4.3 billion a year.
  • Annual Equivalent Rate (AER) loopholes: The voluntary guidelines around AER allow room for providers to exploit them and mislead consumers. This includes tactics such as advertising a headline AER which doesn’t start immediately and paying a lower rate in the interim.
  • Roll-over and auto-renewal practices: At the end of fixed-term periods a large number of providers roll over savings into poor paying ‘matured funds’ accounts, with the majority paying between 0.10% and 0.50%. Others auto-renew consumers, meaning consumers could find themselves unwittingly tied into new deals, facing lost interest or penalties for withdrawing their money.
  • Difficult switching: A mystery-shopping investigation found considerable variation in how long providers said it would take to transfer a cash ISA, with some taking up to six weeks – well over the industry guidelines of 15 working days. For competition to be effective providers need to make it easier to switch and give consumers clear information to encourage them to shop around.
  • Poor customer notification: Fewer than one in five (17%) savers know what their interest rate is and a quarter (25%) of those with a bonus rate don’t know when it ends. Part of this is because banks aren’t clear with customers – we found four which don’t show the interest rate on internet banking platforms at all.  

This lack of competition has left people disengaged and losing money and underlines why voluntary guidelines, set by the industry, are not enough to make this market work in the best interest of consumers. That’s why we’re calling for the Financial Conduct Authority (FCA), as it continues its investigation into the market, to take this golden opportunity to break with the regulatory failings of the past, and use its competition powers to revolutionise the savings market.

Which? executive director, Richard Lloyd, said: 

“We have taken an extensive and wide-ranging look at the cash savings market and found systematic failings preventing consumers from getting a good deal.

“It’s now time for the regulator to break with the failings of the past and put pressure on banks and building societies to scrap the savings trap. We want the Financial Conduct Authority to revolutionise the savings market so loyalty is rewarded and consumers get a better return for their hard-earned savings.”

Notes to editors:

1. A full copy of the report can be found here:—july-2014-374950.pdf

2. In the last few months, a number of banks have made welcome changes to their products to address zombie accounts, increase simplicity and improve communications. We are pleased with the changes that have been made by RBS/NatWest, Santander, HSBC, Leeds Building Society and Nationwide, as well as commitments from Barclays and Lloyds Banking Group to respond to some of these issues and we will continue to work with all the providers as further changes are made.

3. The AER for high-value sounding accounts in based on a deposit of £5,000.

4. Instant access savings accounts interest rates 2007-2014:

instant access

5. Prevalence of ‘zombie’ superseded accounts:

zombie accounts


6. Over 31,000 people have supported our campaign calling on banks and building societies to ‘Scrap the Savings Trap’: 

Don’t leave customers languishing in sub-standard savings accounts – close ‘zombie’ accounts and move people’s money into one default easy-access or ISA account at the end of fixed terms.

Stop making ISA switching complicated and laborious – make switching quicker and stop limiting transfers into new ISAs.

Don’t leave customers in the dark about the best return on their savings – display interest rates prominently and consistently on all statements, annual summaries and online pages, improve notifications about the end of bonus rates or fixed terms, and ensure better offers are promoted by staff and in statements.


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