The FCA says some progress has been made in encouraging providers to increase savings rates but too many accounts - especially closed accounts - let savers down by paying derisory rates.

According to FCA data, closed accounts from Virgin Money and Northern Rock pay as little as 0.1% on a £10,000 deposit.

Closed accounts from ICICI bank, UBL Bank and Yorkshire Bank pay as little as 0.2% or 0.25% on a £10,000 deposit.

In a data update published today the FCA said it had seen recent “indications of a more competitive cash savings market emerging.”

In July the FCA criticised savings providers for not increasing savings rates in line with the rapid rise in the Bank of England base rate. Many providers have upped their rates since the warning with deposit account rates of 5% or more now commonplace.

The FCA said in its savings account update today: “Higher rates (are) being paid to savers and data (is) indicating people are moving their money to take advantage of them.

“From July 2023 to October 2023, both the volume of deposits held in bank and building society non-interest-bearing accounts and easy access accounts reduced by £11bn. Deposits held in fixed-term and notice accounts increased by £17bn.”

The FCA set out a 14-point action plan in July and pledged to deliver on its commitment to monitor relevant firm and market trends, including setting out higher and lower easy access rates on the market and analysis of the speed and degree of base rate rises being passed on to savers.

The regulator said that the average rate paid on easy access deposits in October was 1.99%, compared to an average rate of 1.66% in July (prior to the publication of the FCA review) and 0.89% in January.

Fixed-term accounts and notice accounts paid 2.94% in July rising to 3.52% in October. The watchdog said many accounts paid more, with several accounts currently paying 5% or higher (for both easy access and fixed term deposits). As of 4 December, there were 311 Instant / No Notice accounts available paying over 3%, 173 over 4% and 37 over 5%.

Despite the improvements the FCA said there was more to be done and it expected “continued improvement” from some firms.

Sheldon Mills, the FCA’s executive director of consumers and competition, said: “There is a more competitive savings market now than July – including many easy access accounts paying above 5%.

“But there are still low paying accounts out there, particularly products that are no longer on sale. We want firms to keep prompting customers in lower paying accounts to move, and we encourage customers to shop around for the best savings deals. We will continue to closely monitor the savings market in 2024 to ensure that customers receive fair value.'

• FCA data update on the cash savings market.