Ben Rawson-Jones, Thursday July 17, 2008
A new savings scandal has emerged hot on the heels of the bank charges fiasco, as lengthy delays to Isa transfers are costing consumers significant money. Banks and building societies have been deluged with complaints, but what should a saver do if confronted by this situation? Read on to find out
Investing in an individual savings account (Isa) makes perfect sense as you can earn tax-free interest on savings up to £3,600 in cash every year. The rules clearly state that you can transfer money from one cash Isa to another without losing the tax-break, which sounds ideal as rates on many accounts lose their competitive edge over time. But for many savers, making an Isa transfer is easier said than done.
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There have been thousands of complaints from customers who have waited more than the 30 days permitted by HM Revenue & Customs (HMRC) to transfer their savings from one bank or building society to another. Now Nationwide building society has withdrawn from the transfer market until it sorts out the backlog of applications. For the time being it will only allow transfers between the society’s own Isa products and will only offer new Isas to customers who have not yet used this year’s allowance by cash or cheque.
According to Nationwide, there has been overwhelming demand for cash Isas this year – the provider reports an increased uptake of almost 400% compared to the same three-month period in 2007. The Nationwide Instant Access Isa pays up to 5% and it claims that demand has been so vast that it can no longer deliver the service its members expect if it continues to take transfers.
Increased demand is not the only problem. The Banking Code, the self-governing rules established
by the industry, has no specific guidelines on Isa transfers and the city regulator, the Financial
Services Authority (FSA), has no control over the issue. Though HMRC places a 30 day ‘ limit’ on
Isa transfers, this appears to be little more than a guideline as there is no punishment for
providers that fail to conform.
This means that the provider can sit on your money. You can’t withdraw it as you’d lose
valuable interest, so savers are instead left to contact call centres only to possibly receive
conflicting stories about whether their existing provider or the new provider is to blame. The
process takes even longer because banks still use cheques to send your money instead of electronic
transfers.
