The Financial Conduct Authority (FCA) has written to investment platforms and SIPP operators warning investment platforms to properly handle interest on customers' cash balances。

As interest rates rise, the amount of interest earned by some companies increases。The FCA recently surveyed 42 companies and found that most retained a portion of the interest earned on these cash balances, which may not reasonably reflect the company's cost of managing cash.。

Based on responses to requests for information and ongoing contact with businesses, the FCA found that:

• Of the 42 companies sampled, most (71%) retained at least some of the interest earned on customers' cash balances, ranging from 10% to 100%。On average, they retain 50% of that。
• Of the interest-retaining platforms, 61% also charge a platform fee for customer cash they hold。
• The quality of information disclosed to consumers about retained interest is uneven, difficult to find and difficult to understand。
• Companies offer several different reasons for why they retain interest。The two most common reasons are to retain cash interest to cover the cost of managing cash or to prevent long-term distribution of cash in platform accounts。

The FCA wants businesses to ensure that interest on their retained cash balances provides fair value and is understood by consumers to be consistent with consumer responsibility, particularly price and value, and consumer-understood responsibility outcomes.。

The high percentage of interest retained by some companies is inconsistent with the reasonable expectations of customers and is therefore unlikely to constitute an act of goodwill by the company。Corporate retention of interest generally does not provide fair value to consumers (for example, if the interest significantly exceeds operating costs, which in turn are justified by operating costs)。

The FSA also expressed serious concern about the practice of certain companies that both retain interest and charge account fees or commissions on customers' cash ("double soaking").。This practice is particularly confusing to consumers, and the FCA believes that this practice does not prove that the company is acting in good faith, that is, dealing honestly, fairly and openly, and in accordance with the reasonable expectations of customers.。In addition to these concerns about double saturation, there are more general concerns about the level of interest retention。

Sheldon Mills, executive director of the FCA's Consumer and Competition Department, said: "Rising interest rates mean higher returns on cash deposits: investment platforms and SIPP operators now need to ensure that how much interest they keep and how much they charge customers who hold cash is fair to those with dual deposits.。If they can't do that, they need to make changes。"

"If they don't, we will intervene.。"

Companies need to make changes by February 29, 2024。