City watchdog threatens ban on ‘rip-off ’ exit fees for savers

MILLIONS of savers are being prevented from moving to a cheaper stockbroker, the City watchdog has warned, as it threatened to ban firms from applying exit fees.

A Financial Conduct Authority (FCA) study on how consumers invest their money found savers are being effectively locked into rip-off investment services through a combination of high exit fees and confusing prices.

Failing to switch away from expensive stockbroking services over many years could result in savers being tens of thousands of pounds worse off in later life, experts said.

The findings are the latest in a string of investment rip-offs to have been uncovered by the watchdog. In April it set out reforms to stamp out unfair asset management fees, after finding savers were unwittingly handing over huge commissions to financial advisers.

Now the regulator is threatening to crack down on anti-competitive charges by stockbrokers.

The amount of money being invested by consumers doubled in size to £500billion since 2013, the FCA said, as savers are becoming increasingly reliant on the stock market for income.

Figures compiled by this newspaper reveal a huge disparity in the value for money of stockbroking services, with some savers paying as much as three times more than others.

However, because prices are complex and often hard to compare, savers may not realise they could be better off if they switch, the FCA said. In addition many of the UK’S biggest stockbrokers charge significant exit fees to discourage savers from switching.

Only one in 10 savers had switched brokers in the last three years, it found.

Christopher Woolard, executive director of strategy and competition at the FCA, said: “It is important that the problems we have identified are addressed so that consumers don’t lose out.”