The Financial Conduct Authority is planning major reform of the easy access cash savings and cash ISA markets to provide a better deal for savers.

The FCA says many of the 40m cash savers - usually those who stay with a provider after an introductory rate has finished - often get a poor deal when introductory rates end.

Under new rules proposed by the regulator, all firms will have to set and publicise a single easy access rate (SEAR) across all easy access accounts so savers can compare rates more easily.

The FCA estimates that once the new rules are implemented consumers will benefit by £260m from higher interest payments because competition will force rates up.

Firms will have the flexibility to offer multiple introductory rates for up to 12 months, then they will need to choose one SEAR for their easy access cash savings accounts and one for their easy access cash savings ISAs.

The watchdog says it has previously raised concerns that competition is not working well for many of the 40m consumers who hold either an easy access savings account or easy access cash ISA.

The FCA’s proposals aim to improve competition in the market, “encouraging firms to increase the interest rates they offer” as well as protecting those consumers that currently receive the lowest interest rates.

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

The proposals will also require firms to publish data every 6 months on the SEARs they offer.

The FCA is now seeking feedback on the proposals set out in  Consultation Paper CP20/01, by 9 April. Consultation Paper