Tessa making followers wait

By SYLVIA MORRIS, THIS IS MONEY AND DAILY MAIL SAVINGS EXPERT
Updated: 19:00 EST, 18 April 2001

TESSA savers are being hampered from moving their money by poor back-up systems from banks. The poor service means they are losing out on interest that they could earn if they were able to move to more lucrative accounts.

Some savers have waited weeks for their cheques and maturity certificates to arrive, while others have battled just to have their money reinvested in another tax-free account with the same bank. Their frustration has been made worse by long, fruitless telephone calls trying to reinvest their money.

The worst case that has come to Money Mail's attention is charity worker Jennifer Le Morvan, from Surrey, who waited patiently for more than two months for her money to be reinvested by the Woolwich. During this time, she earned just 1% interest. After 66 days, during which time her calls and visits to the branch brought her no closer to a solution, she lost heart, closed her account and reinvested her money with HSBC.

Jennifer says: 'I have been with the Woolwich for more than 20 years and am very disappointed that I have missed out on my interest.'

Her Tessa had matured on January 22 and she asked the Woolwich to reinvest her money into its Tessa-Only Isa. By 29 March, having made no progress, she closed her account. For the two months after her Tessa matured she earned just £18.07 after tax on her £10,918, which works out at less than 1% a year. Had the Woolwich switched her as she had asked she would have earned 6% to 6.25%. Woolwich has since agreed to pay her extra interest of £125 for the loss of interest since her plan matured.

Mrs Le Morvan is not the only victim of Woolwich's poor administration. A spokesman for the Woolwich says: 'The order process in the branch has caused delays.

'We are paying customers for loss of interest.' Customers with other banks, including Barclays and Northern Rock, have also waited for more than a week for their cheques to arrive and even longer for their maturity certificates.

Tessa holders whose plans have run their five-year course can reinvest their money into a Tessa-Only Isa - also known as Tessa Transfer Isas and Toisas - and carry on earning tax-free interest. You do not need to keep the money with the same bank or building society, so can move to earn better rates of interest.

But to move, you must have a Tessa Maturity Certificate. Wool-wich, Barclays and Northern Rock print the certificates from a central office and send them out by post. Others which follow this practice include Alliance & Leicester, Nationwide, Lloyds TSB and NatWest.

All aim to send out certificates on the day of maturity, but there have been problems with them reaching savers quickly. But savers awaiting their certificates are unlikely to see any compensation for lost interest. Under Tessa rules, a bank or building society has 30 days in which to produce this certificate once you have asked for it.

Savers with Abbey National, Bristol & West and Yorkshire Building Society can sidestep this problem. All will print out your certificate in their branches. Halifax will also print out at the branch if you want your certificate immediately.

Otherwise, it comes through the post. If you do not give your bank or building society instructions as to what you want to do with your Tessa money, it has to transfer it to another account. These can pay paltry rates of interest - and it is taxable. Woolwich is writing to the customers in its Tessa Maturity account to advise them to move their money into a more lucrative account.

GET YOUR TESSA FACTS RIGHT
•You have six months to transfer up to £9,000 from your matured Tessa into a Tessa-Only Isa and carry on earning tax free interest.

• With a Tessa-Only Isa you do not have to tie your money up for five years to earn tax-free interest.

• Check what your Tessa provider has to offer. Some, which include Coventry and Yorkshire building societies, offer better rates on Tessa-Only Isas to those who have built up their Tessas with them.

• The investment does not count towards your mini or maxi Isa allowance in any tax year.

• You do not have to stick with the same bank or building society when your plan matures.