Status of Cash in ISA following bank failure

MoneySavingNovice

Should the worst happen and the bank which I have my Cash ISA fails, then I will make a claim on the UK Financial Services Compensation Scheme. This should cover me up to £35 k (£50k after 7th October)

However my question is can I re-invest the money I get back from the UK Financial Services Compensation Scheme into another Cash ISA, or does this cash lose its ISA status.

I don’t have any other money in this bank other than that in the ISA.

The UK Financial Services Compensation Scheme states that they will pay out any money claimed via cheque, hence my concern.

Thanks in advance of any help on this issue.

Baldur

See my post http://forums.moneysavingexpert.com/showthread.html?p=14752757#post14752757

MoneySavingNovice

Thanks Baldur - I acknowledge JudithEllen asked the question first.

Does anyone know or have a view on the the answer?

Thanks

Baldur

MoneySavingNovice wrote: »

Thanks Baldur - I acknowledge JudithEllen asked the question first.

Does anyone know or have a view on the the answer?

Thanks

You could try contacting the HMRC ISA Helpline to see if they have a definitive answer - AFAIK, the only time this has arisen (when NR depositors withdrew ISA deposits in panic) the government had to legislate to give special dispensation.

MoneySavingNovice

Thanks Baldur that a good idea, I will ring them tomorrow - if others also wants to ring this might help get us a good answer.

The HMRC ISA help-line number is:-

0845 604 1701

and they are open 8:30am to 5:00pm Monday to Thursday
and 8:30am to 4:30pm Friday

acoggin

Did you get an answer from the FSA regarding this?
It would be very sad to lose the many years of tax free status on the savings.

Chy_2

I phoned the HMRC ISA number around 2pm this afternoon - they are getting a lot of calls about this, at the moment it is unclear.

As mentioned above, the Northern Rock situation was quoted and the nice HMRC lady said that there may be something similar - she said usually the information will come out in the press before the HMRC customer service team are told!

whu

Could someone please clarify if a cash ISA is counted as part of savings with a bank or is it counted as an investment- I think that it counts as savings but would appreciate confirmation given that there are different compensation levels for savings / investments

Thanks

Baldur

It's savings.

A Stocks & Shares ISA would not be classed as savings, though.

MoneySavingNovice

Quote:-
This is Money:-

Alan O'Sullivan, banking reporter with This is Money, says: This is a tricky one. The phone-lines of the FSCS have shut down due to the amount of calls they have been receiving and the City watchdog, the Financial Services Authority, does not know the answer. HMRC are checking the situation with their boffins, but it doesn't look good.
Technically, you are only allowed to keep the tax-free status of an Isa is you transfer it from one provider to another. Cash the Isa at any point and you lose that status. The compensation process is complicated enough as it is: we will now have 300,000 UK savers seeking money off the Icelandic government, followed by the UK FSCS.
Personally, I think it is extremely unlikely the FSCS will specifically arrange for any Isa money to follow separately into another prearranged Isa provider's coffers. They're going to have their hands full enough.
The FSA did say that the rules may be bent as individuals have, in essence, been forced to withdraw their Isa funds. But that's a big 'maybe'. As frustrating as this sounds, you may find that you have to start building up your Isa allowance again from scratch.
Keep in close touch with NatWest however: you never know, Icesave used to have a good customer services record, so the Isa funds may have made it across before all withdrawals from the bank were frozen.

© Associated Newspapers Limited 2008

MoneySavingNovice

I hope that I have not broken any forum rules with the above post, but it does seem to be a case of watch this space.

When I rang the HMRC ISA help-line (on the 30th attempt) they also did not know.