Move your Isa now to earn hundreds extra in interest

By SYLVIA MORRIS, THIS IS MONEY AND DAILY MAIL SAVINGS EXPERT
Updated: 07:46 EST, 4 May 2011

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Banks and building societies are reporting record requests for cash Isa transfers.

Savers can earn hundreds of pounds extra tax- free interest by moving their money into a better paying account.

New speedier transfer rules have helped increase transfer volumes, as have the Isa promises from big players Halifax, Lloyds TSB and Nationwide.

Halifax, where Isa openings are 180 per cent up on this time last year, pays interest from the day it receives your application to transfer from your current provider.

Nationwide and Lloyds TSB have similar pledges. Savers have £181 billion in cash Isas.

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You could have more than £73,500 in your account, including interest, if you had put in your full Isa allowance each year since launch in 1999, plus money from the previous tax-free scheme known as Tessas, plus the average interest paid each year.

Earning 0.5 per cent rather than the top 3 per cent means losing out on £1,700 tax-free interest a year. Even with £10,000 you lose out on £250 interest.

In the past, banks and building societies have had up to 30 days to transfer your Isas — even so they were taking up to six months to move your cash three years ago, as Money Mail highlighted in its Stop! Isa Thieves campaign.

Customers could be left earning less interest and have no access to their money.

Meanwhile, banks and building societies fobbed off customers’ complaints, devoted insufficient resources to solving the problems and blamed each other for the mess.

This year, the process should run smoothly following the consumer champion Consumer Focus super-complaint about the Isa transfer process to the Office of Fair Trading.

The OFT set new guidelines which came into effect in January, demanding transfers to be completed within 15 days. From next year, banks and building societies will have to print the interest rate you earn on your annual statement.

Here’s how the transfer system should work. Start by going to your new provider’s branch or website. Fill in the transfer form send it off by post, take it into the branch, or send it via the internet.

The timetable for the process should then be as follows:

Day 1-to-5: Your new provider processes your form and asks your old provider for your money.

Day 7-to-11: Your old provider processes the application and sends the money to your new provider.

Day 13-to-15: Your money goes into your new account with the interest backdated to the first day when the old provider stops paying. The missing days allow for the post.