/ Money

Why can’t banks get Isa transfers right?

Golden eggs

We’re in the middle of what we, on the Which? Money Helpline, call ‘Isa season’. We receive hundreds of calls at this time of the year from those trying to find the best Isa deal. Are you feeling the Isa buzz?

Understandably, most people aren’t financial enthusiasts and probably don’t think about Isas more than once a year, if that.

So it’s perhaps not surprising that lots of calls we receive via the Money Helpline relate to the rules around transferring Isas. But as the trusty Isa has been part of the financial landscape for well over a decade now, it shouldn’t be too much to expect banks and building societies to be on top of the rules and therefore provide clear advice.

‘Illegal’ to have multiple Isas?

Unfortunately we get a steady stream of calls from people who’ve been told the wrong thing by their bank. One caller was told by an adviser at his bank that it was ‘illegal’ for him to have more than one Isa. This advice had scared him as he had more than one Isa – and is of course completely wrong.

While it is true that you can’t pay into more than one Isa at a time, you can have more than one ‘inactive’ Isa – for example, you might have one that you paid into last year and another that you’ve paid into this year, not to mention that you can have a cash and a stocks and shares Isa in the same tax year.

We also regularly hear stories about banks who mess up Isa transfers. We work with individuals to get them the compensation they are owed, but in an ideal world, the mistakes shouldn’t be made in the first place.

Do you think banks and building societies make it easy to transfer Isas from one account to the next?

Let your Isa provider do the leg work

If you’ve got money to save and you haven’t got an Isa already, an Isa is a good place to start as you don’t pay tax on the interest. If you already have an Isa but it’s on a rubbish rate, then it makes perfect sense to switch to a better one.

If you want to make sure it all goes smoothly, your best bet is to understand the steps so you can be aware if your bank gets it wrong. The most important thing to remember is not to withdraw your money and take it to your new provider. If you do this, it will lose its tax-free status. Instead, just tell your new provider you want to transfer and they’ll do the work for you.

Have you made the switch for the new Isa season or do you think the current rates provide little incentive to make the move?

Comments
Member

Are some ISA providers still using cheques to transfer funds between providers? This was certainly the case a few years ago, whereby the old provider would issue a cheque and stop paying interest immediately while continuing to earn interest on the customer’s money until the new provider processed the cheque. In an age when the banks (quite rightly) are trying to abolish cheques, they still use cheques when it suits them!

Member

I’ve just switched my Isa account and noticed that the money is no longer in my old account – but hasn’t gone into my new one either! I’m hoping it’s just in limbo but this has me feeling a bit nervous – is it common for it to take a few days in between accounts?

Member

I will be watching this Conversation with interest, if you excuse the pun.

I need to transfer from a Santander account that is currently paying 0.1% interest. It’s absolutely disgraceful that banks entice you to invest by offering a decent rate of interest and then treat customers like this when they are not looking.

Good to see you looking in, Hannah.

Member
Audrey says:
27 April 2012

I’ve just transferred into a Santander Isa from Halifax which wanted me to continue with them at 0.5% down from 3.00%. Santander are offering me 3.3% without any penalties for withdrawals. Admittedly the rate is 0.5% with a bonus at the end of 2.8%. but the interest is calculated daily at 3.3% but not paid until the year is up. I cannot understand why Santander has such a bad reputation, I have always found them very accomodating, patient with my enquiries (however inane) and most helpful.

Member

Hi Hannah

This is almost certainly because of the method the banks have used to transfer the money – if it’s been sent by BACS it will take a couple of days to appear in the new account. Keep an eye on it though, and if it doesn’t show up in your new account within 3 working days, follow it up with the bank. Don’t worry though – you shouldn’t lose out on any interest, as this should be backdated to the day the transfer was made.

Member

Rebecca, bank transfers can no longer take 2 to 3 days. Such a delay is now prohibited by Regulation 70(1) of the Payment Services Regulations 2009. As a result, bank transfers are in practice now sent on a same-day basis, most often using Faster Payments Service.

Member
Steve Caunt says:
9 May 2012

Sorry folks – the recent responses in this thread are simply WRONG! The fact is that many banks are still using cheques – yes cheques, remember those flimsy bits of paper that the banks said they did not want US to use any more! – to complete ISA transfers. Net result is that old ISA people close your account and send a cheque to new ISA people – all the while earning the interest that you do not get any more! New ISA provider then has to bank cheque and wait for it to clear. This process is still taking 15 days – rather than the 15 microseconds that an electronic transfer would take. SCANDAL!