ISA matures on 31st May 2011 ? - why ?? Loss of interest maybe

financequest

I have looked at Coventry 1 year fixed rate ISA (currently 3.25%). Their blurb says 1 year fixed ISA matures 31st May 2011. Looking on the web, it seems that many of the ISA providers are also using this 31st May clause. I rang Coventry today, and asked the question "If I invest £5100 today 8th April 2010, does it mature on 8th April 2011 or 31st May 2011 ?. Answer, you cannot touch it until 31st May 2011. So if I decide to move to a higher paying ISA provider next tax year, I would lose a minimum 7 weeks interest and possibly much more interest. I told them that this seemed to be a cynical ploy to deter ISA moves. Think I will keep looking.
Assuming that the Coventry BS advisor I spoke to was not talking tosh (not impossible), then this scenario raises numerous questions. I may invest £5100 in the Coventry ISA @ fixed rate 3.25% on 9th April 2010 for tax year April 6th 2010 to April 5th 2011. Coventry only allows movement of these funds on 31st May 2011. At that time I am over 7 weeks into the following tax year, not counting any lengthy delays to process swop to alternative provider. If Coventry drop the rate to 1% on 6th April 2011, and I decide to move my ISA on 31st May 2011 to another provider offering 3% for 6th April 2011 to 5th April 2012, how does this affect me ?. I need to speak to them again to clarify. BTW, of the 4 providers asked sofar, none were able to/or willing to explain the 31st May clause !.
link to existing blog http://forums.moneysavingexpert.com/showthread.html?p=31685105&posted=1#post31685105

Hungerdunger

You've misunderstood, although I appreciate that it's misleading when they call it a one year account.

If you have another look at the Account Details, you'll see that the account runs to 31 May 2011 and the interest rate is fixed until then so you won't lose any interest.

If the Coventry aren't able to offer you a decent rate on your money as you get close to the maturity date, you will have to see what else is worth transferring to at the time.

financequest

On the contrary, I believe that I understand only too well. Scenario... Invest £5100 @ 3.25% 9th April 2010 to 31st May 2011 ( total sum @ 31st May 2011 = £5300 ( 59 weeks interest )). Lets say Coventry drop rate to 1% on 6th April 2011. I decide to move £5300 to another provider who quotes 3%, but fixed to 5th Apr 2012. Lets say move of ISA takes over 4 weeks up to 1st July 2011 ( not unusual as many providers deliberately drag their feet, and may not pay interest whilst ISA moves take place), I have now lost 1 month of possible 3% whilst earning 1%, plus I only have 9 months of the tax year to benefit from the new provider's higher rate. If this is not designed to deter ISA transfer, or maximise profit for the provider, then why will none of their advisors explain the reasoning behind all this. After all, if the providers have got nothing to hide, why insist on this 31st May clause.

ManAtHome

financequest wrote: »

Lets say Coventry drop rate to 1% on 6th April 2011.

Let's say they don't as the interest rate is fixed at 3.25% until 31/05/2011 - see link in post #2

PBA

financequest wrote: »

On the contrary, I believe that I understand only too well...Lets say Coventry drop rate to 1% on 6th April 2011.

Obviously not. Fixed means fixed, Coventry can't drop the rate before the fixed period ends. Most fixed rates mature at the start/end of the month.

financequest

OK all, lets forget about the shenanigans !, will someone, somewhere explain why ISA maturing on the 31st May is for the benefit of the investor, and not the provider. I strongly suspect the provider will benefit most.

ManAtHome

Why should it make any difference - you get the advertised rate up to a specific date and are free to transfer to another provider the day after. Not sure why you think a change of ISA on 6th April is guaranteed to be a better deal than what may be available 1st June - you'd still be getting the 3.25% for the extra couple of months you're locked in.

The 'benefit of the investor' is if rates are lower next year, 'benefit of the provider' is if they aren't - afraid you'll need to spin a coin on that one.

Personally, I'd go for the Santander/A&L 3.2% one - it's instant access and guaranteed at 2.7% over BoE rate (which is more likely to go up than down) - will 'cost' you a couple of quid for your £5,100 if it doesn't (and you'll have to transfer it in a year's time as the rate will drop)...

financequest

Very interesting !. I am sure this will not surprise you !. If you raise a question on the MSE forum that challenges possible sharp practice by any of the various financial institutions, it is virtually guaranteed that numerous replies quickly arrive, defending/championing, or raising confusing doubts about concerns re the questionable practice in question. If you take a few moments to look at previous forum updates from some of these characters, it often becomes glaringly obvious that they have either a vested interest, or run the business in question. Not a conspiricy theory, have a look for yourselves.

opinions4u

financequest wrote: »

Very interesting !. I am sure this will not surprise you !. If you raise a question on the MSE forum that challenges possible sharp practice by any of the various financial institutions, it is virtually guaranteed that numerous replies quickly arrive, defending/championing, or raising confusing doubts about concerns re the questionable practice in question.

I really think you need to get a grip on reality.

1) I think you are absolutely right to check through the ins and outs of a product before buying it. I wish more people did.

2) The Coventry offer that you have concerns over me is fixed until 31/5/2011. If you don't like the maturity date, don't buy it. Personally fixing for 59 weeks instead of 52 is neither here nor there to me. But if you need your money back before 31st May 2011 I'd steer clear. There is no "sharp practice" to justify some sort of conspiracy theory though.

If you take a few moments to look at previous forum updates from some of these characters, it often becomes glaringly obvious that they have either a vested interest, or run the business in question. Not a conspiricy theory, have a look for yourselves.

I spent over 20 years working in the industry. It has its failings. I can't speak for others involvement with banking, but some of the posts above could easily be from people who simply know how to shop around for the best savings deal.

But explicitly telling customers when a fixed product matures is, to my mind, good practice, totally fair and helps the customer to make a decision to purchase (or not).

As for your dig at other posters, perhaps thanking the one who suggested an alternative (and more flexible) product would be appropriate on your part.

RayWolfe

financequest wrote: »

Very interesting !. I am sure this will not surprise you !. If you raise a question on the MSE forum that challenges possible sharp practice by any of the various financial institutions, it is virtually guaranteed that numerous replies quickly arrive, defending/championing, or raising confusing doubts about concerns re the questionable practice in question. If you take a few moments to look at previous forum updates from some of these characters, it often becomes glaringly obvious that they have either a vested interest, or run the business in question. Not a conspiricy theory, have a look for yourselves.

Oh dear! Another geezer with issues. Seen any aliens recently?

Edit: Just noticed the times of your posts ... just back from the pub?

dtaylor84

financequest wrote: »

OK all, lets forget about the shenanigans !, will someone, somewhere explain why ISA maturing on the 31st May is for the benefit of the investor, and not the provider. I strongly suspect the provider will benefit most.

Then pick a different account. But whatever fixed rate account you pick will have a maturity date, what's so special about 31st May?