The FCA has announced a new proposal to reform the easy access cash savings market, suggesting all firms should comply to new rules and set a single easy access rate (SEAR) across all easy access accounts.

The regulator suggested firms would have flexibility to offer multiple introductory rates for up to 12 months – and would then need to choose one SEAR for their easy access cash savings accounts, and one for their easy access cash savings ISAs.

Suggesting the proposals are aiming to improve competition in the market, the FCA wants to encourage firms to increase the interest rates they offer as well as protect consumers currently receiving the lowest interest rates.

The regulator estimated that consumers will benefit by £260m from higher interest payments.

FCA executive director of strategy and competition, Christopher Woolard, said: “Our proposals would mean firms have a single rate for customers immediately after their accounts have been open for 12 months.

“Firms will choose the rates they offer, and the rates they offer will have to be clearly published. This will prevent firms from gradually reducing interest rates over time and make them compete for all their customers.

“We are concerned that many longstanding customers are seeing a poor outcome and we want firms to focus more on these customers. The new rate will also make it easier for savers to know whether they are getting a good deal after any introductory offer has expired.”

The FCA said it expects longstanding customers will benefit from higher interest rates because firms will compete on the SEAR.

AJ Bell personal finance analyst, Laura Suter, suggested the new plans from the regulator would be a ‘dramatic change,’ but that despite the improved amount from higher interest payments for consumers, to get the best rates they would still need to shop around.

“It will be much simpler for customers to find the rate they are being paid, and to then compare that figure to what they could get elsewhere. It also means customers of the same bank with multiple accounts won’t find they are being paid a range of different interest rates.

“Hopefully the ‘cliff-edge’ effect of the interest rate reducing after the initial 12-month offer period will spur more people into action to switch to a better rate.

“However, the move will still mean that to get the best rates you need to shop around. It’s estimated that cash account customers miss out on £1.1bn in interest by not switching to a better rate, and this fix from the FCA doesn’t solve that.”

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