The Financial Conduct Authority (FCA) has warned investment platforms and self-invested personal pension (SIPP) operators over potential overcharging.

The watchdog on Tuesday said that it had written to 42 companies laying out its concerns on the way they deal with any interest earned on customers’ cash balances.

In a statement, the FCA said that a recent survey of the firms found the majority retain some of the interest earned on these cash balances, which may not reasonably reflect the cost to firms of managing the cash, while many also charge a fee to customers for the cash they hold, known as “double dipping”.

These practices may not be providing fair value to customers and may not be understood by consumers or properly disclosed, the FCA said, adding that firms have been told to cease any double dipping.

The firms have been given a 29 February 2024 deadline to comply.

Sheldon Mills, executive director of Consumers and Competition at the FCA said: “Rising rates mean greater returns on cash. Investment platforms and SIPP operators need now to ensure how much of the interest they retain and, for those who are double dipping, how much they’re charging customers holding cash, results in fair value. If they cannot make that case, they need to make changes.

“If they don’t, we’ll intervene.”

While the FCA did not name any specific companies, shares in major investment platforms such as Hargreaves Lansdown and AJ Bell saw their share price drop by more than 5 per cent in early trading.

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