Another Isa mess

By TONY HAZELL FOR THE DAILY MAIL
Updated:

 

For many months banks and building societies have claimed that there is nothing wrong with the cash Isa transfer system.

But the regular flow of complaints in our mailbag suggested otherwise.

So we put them to the test by inviting you to tell us the problems you were suffering when attempting to transfer your Isa. Your letters and e-mails have helped nail this particular industry lie.

The cash Isa system is very clearly broken, as the evidence you have sent shows. We have sent more than 1,700 complaints to banks and building societies all ready and as the flow continues that number is moving inexorably towards 2,000.

This is just the tip of the iceberg. Our complaints just feature those who read Money Mail and found the time to write to us.

Who knows how many thousands more are trapped in this chaos while banks and building societies pass the buck between themselves.

At the root of this is the archaic system used for Isa transfers, which appears to have been set up as a deterrent to all those who would dare to switch in search of a better interest rate.

If you want to switch to bank A, they must send a request to bank B, which should send a cheque back to bank A. All this is done by post. If anything is slightly out of kilter, such as a mis-spelt name, then the paperwork can bounce back again.

Paperwork regularly gets lost and savers are left to grind their teeth, while they wonder just who has got their money.

Nationwide came out as by far the worst offender in our mailbag. It now admits that it did not have enough staff to cope with the volume of transfers.

Its high interest rates, coupled with fears about some banks, led to its inflows rising and rising through the spring when it had expected them to tail off. However, while it can be forgiven for being caught on the hop, it should not have given customers the runaround.

We have come across far too many cases in which people have not had a clue where their money is and overwhelmed staff have not offered the assistance customers should be able to expect.

Isa transfers are not going to stop. Their volume will continue to increase as savers become ever more sophisticated at chasing top rates and as the money held in them accumulates.

Transferring for an extra 1 percentage point will only earn you another £10 on a £1,000 balance, but on £50,000 it is worth £500. This is why it is vital that HM Revenue & Customs and the industry work together to simplify radically the transfer process.

Banks and building societies cannot be expected to continue to work through a morass of paperwork; and savers should not lose contact with their money for months at a time. Our idea to hand power to customers via Isa transfer certificates is simple and would work.

In the meantime, those which cannot or will not hit the pathetic 30-day deadline for transfers must be hit with sanctions that will encourage them to focus their minds and their resources more effectively.

Savers and shareholders with Bradford & Bingley are justifiably worried about their money. Windfall shareholders have seen the value of a 250 share-holding plummet over the course of the past two years from £1,153 to £85. The bank has no chief executive and, even when it had one, appeared rudderless.

It had no idea what it wanted to be. Its misguided management transformed it from a successful building society to a pseudo mortgage broker, sending its customers down the road to rival lenders. It bought John Charcol and attempted to become an independent financial adviser, then changed course again to become a buy-to-let lender.

Now six other banks have had to ride to the rescue by guaranteeing the rights issue in a deal that will probably see them owning 30% of its shares. Whatever happens from here savers' money should be safe. It is unthinkable that the Government would allow savers to lose money. And there is also the Financial Services Compensation Scheme, which guarantees the first £35,000 of money on deposit - and next year should guarantee £50,000.

But given the fiasco of recent weeks, what attitude should savers take? Well, banks have in the past been very fond of telling us that they are not charities; they have shareholders to pay. Well, neither are savers charities. It is not their job to prop up moribund banks that lack a clear strategy and whose directors earn massive salaries despite plummeting share prices.

So take care. By all means chase top rates, but always bear in mind that the compensation scheme currently covers only £35,000 per person with any one bank. Spread your money around and remember it is up to YOU to look after your own savings.

Capital One's Platinum Mastercard offering 0% borrowing to September next year looks a fantastic deal. But do you know anyone who has it? Me neither.

I know of three people who have applied for it. One, an investment banker with no significant debts outside of her mortgage, was turned down. Another, earning well above the national average wage, who does not even have a mortgage, was also refused.

A third, who has paid off their mortgage and is a high earner, has been offered one with a £1,500 credit limit. I know credit is tight, but I am beginning to wonder whether this card - which is sitting at the top of the best buy tables - is actually aimed at anyone other than the boss of Capital One itself.

Most watched Money videos