As part of our campaign to ‘Scrap the Savings Trap’, we are calling on savings providers to improve how they notify customers about interest rates and the end of bonus or fixed rates.
New Which? research reveals less than one in five (17%) savers know what their interest rate is exactly and two-thirds (68%) of those who don’t know when their bonus rate ends are relying on their provider to tell them. We believe not having this information can make it difficult for people to compare accounts and acts as a barrier to switching.
The majority (62%) of savers use online banking as the main method of managing their accounts but we found a confusing variation in how rates are displayed. Banks are not required to show interest rates online and four – NatWest, Royal Bank of Scotland, The Co-operative Bank and Britannia – don’t display them on internet banking platforms at all.
Of those that do provide this information, most show the interest rate on the same page as transactions, while Smile and Santander include it on online savings statements.
We also found a wide variation in notification periods about the end of bonus rates. Of the 18 providers we looked at who offer bonus rates, 12 contact consumers at least two months before, three did so a month before and two gave the minimum two weeks’ notice.
Some providers use passive language such as ‘you don’t need to do anything’, in notification letters at the end of fixed-rate periods. This may make consumers think they don’t need to take action when actually their money could be automatically switched into another fixed-rate or lower paying account. Eight providers auto-renew fixed-rate accounts and Aldermore, Santander and Bank of Cyprus UK have no cooling-off period meaning customers face lost interest or penalties for withdrawing money.
We want providers to ‘Scrap the Savings Trap’ and stop consumers from missing out on better deals by displaying interest rates prominently and consistently on all statements, annual summaries and online pages and improving notification about the end of bonus rates or fixed terms.
As part of their investigation into the cash savings market, the Financial Conduct Authority should work with savings providers to address these issues and identify the best way of notifying consumers about the end of deals to prompt them to switch accounts.
Which? executive director, Richard Lloyd, said:
“This is further evidence that the savings market isn’t working in the best interests of consumers. With interest rates at a historic low, providers must do more to help their customers find the best deal. They must be crystal clear about interest rates and let people know when bonus or fixed rates come to an end to prompt them to shop around.”
Notes to editors:
- Methodology: GMI, on behalf of Which? asked 3,824 members of the general public about their savings account provider. Fieldwork took place online, from 28th February to 16th March 2014.
- Bonus rate methodology: We surveyed 26 providers which included Aldermore Bank, Bank of Scotland, Barclays, Clydesdale Bank, Coventry Building Society, first direct, Halifax, HSBC, Leeds BS, Lloyds Bank, M&S Bank, Nationwide Building Society, RBS/NatWest, Nottingham Building Society, NS&I, Post Office, Principality Building Society, Royal Bank of Scotland, Sainsbury’s Bank, Santander, Skipton Building Society, Tesco Bank, The AA, The Co-operative Bank, TSB and Virgin Money in November 2013. 18 of these offered bonus rates at the time.
- Fixed-rate account notification methodology: Which? surveyed 25 providers on their fixed rate account practices which included Aldermore, Bank of Scotland, first direct, Halifax, HSBC, Kent Reliance Building Society, Lloyds Bank, Metro Bank, RBS/NatWest, Post Office, Saga Savings, Sainsbury’s Bank, Skipton Building Society, Tesco Bank, TSB, Virgin Money, Yorkshire Building Society Group, Leeds Building Society, Nationwide Building Society, Barclays, Principality Building Society, The Co-operative Bank, Bank of Cyprus UK, Santander and Cambridge Building Society in April 2014.
- Under existing regulations, providers can notify consumers of the end of a bonus rate at any time from three months to two weeks before it expires. There is a variation between fixed-rate savings account providers, with notice periods varying from 14 to 60 days before the deal ends. The majority of providers will only send one written notification, with only a handful using additional methods such a as email or text. There are no specific rules for fixed-rate account maturity notification, or for how interest rates must be displayed on online banking platforms or online statements.
- We are 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.