City watchdog warns over investment scams as more households gamble their money due to meagre savings rates
The City watchdog has sounded the alarm over investment scams, warning many households are gambling their money because of the meagre savings rates on offer.
The Financial Conduct Authority (FCA) – run by interim chief executive Chris Woolard – has reeled off a list of its biggest concerns, from insurers penalising loyal policyholders by ratcheting up their premiums each year to the 7.4m adults it says are drowning in debt.
Key priorities are tackling ‘unsuitable high-risk investments and the ‘devastating’ impact of financial scams.
Warning: The FCA – run by interim chief executive Chris Woolard (pictured) -says it’s biggest priorities are Key priorities are tackling ‘unsuitable high-risk investments and ‘financial scams’
The watchdog’s warning comes a day after the Government-backed National Savings & Investments slashed interest rates and Premium Bond prizes.
As the new tax year approaches, officials at the FCA are worried that desperate savers will be duped into investing their £20,000 Isa allowance into scams such as mini-bonds or highly risky investments in the hope of better returns.
It has already imposed a mass-marketing ban on the sale of mini-bonds after the collapse of London Capital & Finance last year in a major City scandal.
Since then, rates on cash ISAs are at their lowest level in almost three years, with some paying as little as 0.1 per cent.
A report by Moneyfacts this week revealed the average return on long-term deals, where savers tie up their money for 18 months or more in the hope of better returns, has fallen to just 1.34 per cent.
This is the worst rate since May 2017 and barely above inflation, which is running at just 1.3 per cent.
The FCA said despite it cracking down on payday lenders, it remains concerned about the 7.4m people struggling to pay debts.
In an 86-page report it also said insurers are still penalising ‘loyal customers’ by ratcheting up premiums, meaning 6m home and motor insurance policyholders paid £1.2billion more than they should have in 2018.
Gareth Shaw, head of money at Which?, said: ‘It is clear more needs to be done by the regulator and banks to help those trapped in persistent debt. It must also tackle sharp pricing tactics in the insurance industry.’