Halifax is introducing measures to stop savers losing up to £24m a year due to delays when switching Isa provider
Cash Isa customers look set to benefit from new terms and conditions designed to eradicate delays when transferring their existing Isas to the Halifax, the bank said today.
Every year, thousands of savers lose interest and even miss out completely on new Isa deals they have applied for because the process of switching from one provider to another takes so long.
An investigation by the Office of Fair Trading this year found that switching a cash Isa takes on average 26 calendar days, while 25% of transfers take more than 30 days. During this period, customers switching to a better rate earn the lower rate paid by their previous provider. The OFT found there can be a gap of up to five days during which no interest is earned.
The Halifax estimates these delays are costing customers up to £24m each year in lost interest. But from Saturday the bank is introducing a series of measures designed to reduce the effects of such delays on customers transferring their money to Halifax Isas, and generally improve the deals offered to all customers.
• Paying interest at the new product’s rate from the day a customer’s completed transfer application form is received.
• Making all Halifax cash Isa accounts available to both new and existing customers (many providers restrict the best accounts to new customers).
• Displaying interest rates clearly on cash Isa statements, online, in branch and over the telephone from July 2011.
• Giving customers advance notification if any initial reward or fixed rate is due to end.
Russell Galley, managing director of savings at Halifax, said he hoped other Isa providers would make the same commitments to their customers: “Improving the transfer process between providers is vital. When a customer chooses to move their money from one provider to another, they cannot do so themselves without losing the tax advantage of a cash Isa. They are wholly reliant on their existing and new providers carrying out the transfer on their behalf.
“We have always said that improving the process needs to be an industry-wide initiative. This will ensure people are not deterred from making the most of their tax-free savings allowance. We were one of the first providers to adopt the electronic cash Isa payment process. The majority of providers have yet to adopt this more efficient process. When they do, even more customers will reap the benefits.”
Andrew Hagger of product comparison website Moneynet.co.uk said: “If we are to have any chance of maintaining consumer confidence in tax-free savings, particularly when rates are so poor, it needs to be a straightforward and painless process to manage and move your money between providers.
“It is good that Halifax has decided to grasp the nettle and agree to pay interest on Isa transfers from the moment it receives a completed Isa transfer application. They have set the benchmark with this proactive shake up of their processes and others will surely follow this lead or risk losing competitive advantage.
“Every year that passes the more important Isa interest delays become to consumers, especially those who have been maximising their tax-free allowance and have in some cases amassed a capital sum of more than £40,000. A 15-day delay on such a balance at 3% could see them miss out on almost £50 in lost interest, and in some cases the transfer delay is much longer than this.”
Kevin Mountford, head of banking at moneysupermarket.com, agreed: “One would hope that these moves from Halifax will stir up some competition in the market and encourage other providers to simplify their processes for transferring savings between cash Isas, which in many cases are unnecessarily bureaucratic and inefficient.
“Earlier this year the OFT announced the introduction of new cash Isa transfer guidelines after ruling the existing process was too lengthy and all too often caused unnecessary difficulties for consumers. These will come into effect on 31 December. We have been calling for the government to take steps to speed up the Isa transfer process for some time, and it is encouraging to see the banking industry and financial regulators finally taking the switching issue seriously.”
But he added: “If the government is truly committed to creating a savings culture in the UK this needs to be the first of a number of changes designed to help consumers fight the effects of inflation and generate additional value from their savings pots.”
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