UK Financial Regulator Proposes Reforms To Rate Setting For Easy Access Savings Accounts

The UK’s financial markets regulator has proposed significant reforms to the way in which banks and building societies set their deposit interest rates for easy access saving accounts.

The Financial Conduct Authority’s (FCA) proposals focus on providing better outcomes for long-standing easy access savings account customers who are typically being paid lower rates than new customers as a result of what the regulator deems to be an unfair ‘loyalty penalty’.


Loyal savers losing £1.1 billion a year

More than 40 million people in the UK have easy access savings accounts, but only 10% of them pro-actively move their deposits to different accounts on a regular basis to take advantage of the best prevailing rates available in the market. Approximately 20% move their money occasionally and 70% leave it in the same account, often for years, meaning that their deposits are exposed to a gradual reduction of the rate by the provider.


Citizens Advice have highlighted that loyal customers are losing out on £1.1 billion a year in foregone potential interest income as a result of their inertia.


What is a SEAR? Does it remedy the 'loyalty penalty'?

Under the FCA’s proposed new rules, all banks and building societies will have to set a Single Easy Access Rate (SEAR) across all easy access accounts. Providers will continue to have flexibility to offer multiple introductory rates for up to 12 months but will then have to set a SEAR for their easy access cash savings accounts.

The FCA’s proposals aim to improve competition in the market, encouraging providers to increase the interest rates they offer and protecting consumers currently receiving the lowest interest rates. The FCA estimates that consumers will benefit by £260m from higher interest payments.

Christopher Woolard, Executive Director of Strategy & Competition at the FCA said, “Competition is not working well for many of the 40 million consumers with easy access savings accounts and we want that to change. 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.”

As an example of the practice that the FCA is hoping to remedy, one provider is currently paying a range of different interest rates to customers across 82 different easy access accounts. Moreover, the gap between the worst paying easy access saving accounts in the market and the current market-leading rate for this type of account is more than 1.30%.


Will SEAR solve the problem?

The FCA’s proposals, first suggested in July 2018, will take effect by early next year if approved (following a consultation period which runs to the 9th of April) and whilst the new rules have the potential to provide greater clarity and to drive competition, it is possible also that providers will set the SEAR at a low rate, assuming that customer inertia will persist.

The onus will remain therefore on consumers to actively seek out the best rate of interest for their savings and move their deposits to that account.


A simple solution

Flagstone’s online cash deposit platform provides a simple, efficient solution to this challenge.


To open a Flagstone platform account, savers complete just one application form and then have access to more than a dozen different instant access savings accounts paying rates of up to 1.42% AER/Gross.


Having opened their Flagstone platform account, clients can open individual deposit accounts at the click of a mouse. Irrespective of how many instant access, notice or fixed term deposit accounts are subsequently opened, no further paper is required, eliminating the hassle of not only identifying the best deposit rates but also the process of opening and managing multiple accounts.

For more information, contact us at


1 Correct as at 13th January 2020


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