Are you making the most from your Cash ISA?

26th April 2013

Which? survey reveals worrying trend

In a recent Which? investigation, some of the UK’s biggest banks were identified as failing to give the right advice when it comes to transferring and managing their Cash ISAs.

In the investigation, Which? placed 180 calls to 15 leading banks and building societies to assess the quality of advice given to people who want to transfer their Cash ISA savings. The same three questions were asked in each conversation with a Bank Advisor:

•  How do I transfer my cash ISA?

•  Are there any rules about how much I can transfer?

•  Can I transfer to a stocks and shares ISA?

In just 16 of the 180 calls Which? enquirers made, the bank advisors gave correct answers to all the three questions asked.

Big name banks failed to give correct answers to the three ‘simple’ (Which?) Cash Isa questions in more than 50% of the calls that were made. In the percentage of Bank Advisors who answered the three questions correctly, the top three were at National Savings & Investments (NS&I) – 72%; Santander – 71% and the Co-operative Bank – 66%.

The bottom scoring three banks were Royal Bank of Scotland (RBS) – 44%; Yorkshire Bank – 35% and HSBC – 33%. HSBC scored particularly badly when asked if there were any rules about how much you can transfer.

RBS, which finished third from bottom in the Which investigation, told one of the researchers who asked about transferring a Cash ISA, that all he needed to do was ‘just withdraw your funds, close the account down and transfer it over to somebody.’

Five steps to a successful Cash ISA transfer

How many of us have a Cash ISA that has passed beyond its initial first year bonus rate and we haven’t done anything about moving our money to a better ISA? Many Cash ISAs currently yielding between 2-3% interest p.a. only have that rate because of an introductory bonus, designed to draw in the investor. Cash ISA rates dropping to 0.5% or lower after 12 months, are not unusual.

At the present low rates of interest, we can be forgiven for not bothering to look to transfer funds to a better rate ISA. However, the change process is relatively simple, particularly if you have to hand information on ISA products and a form to fill in from your provider, prompting you to take action. Many of us don’t move providers – we’re too loyal! But even if you are staying with your provider, a few minutes work can earn you a few extra pounds in interest.

The five checks and steps to take for a successful Cash ISA transfer are:

1) Check whether or not your new provider will allow you to transfer older ISAs to it, because not all do.

2) Beware of penalties: your existing provider can’t prevent you from transferring but, if you have a fixed-rate or notice ISA, you might incur charges.

3) Contact your new provider and request a Cash ISA Transfer Authority form. Never close your account and transfer the money yourself, as you will lose the tax benefits.

4) On your Cash ISA Transfer Authority form you will be asked to specify the amount you’d like to transfer. If you’re transferring an ISA from the current tax year, you must move the full amount. But if you’ve built up savings from previous years, it’s up to you how much you move.

5) It shouldn’t take longer than 15 working days for a provider to complete the transfer, so complain to your provider if you experience any delays.

Transferring to a Stocks and Shares ISA

It is possible to transfer your Cash ISA to a Stocks and Shares ISA, but you should remember that you cannot then reverse your decision; transfers are not allowed from Stock and Shares ISAs to Cash ISAs.

If you are interested in finding out whether such a course of action could be appropriate for you please get in touch with us.