I need advice about an offer made to me by first direct after ISA cockup

monime

I have received a letter from first direct who have held a cash isa for me for 2 years the amount is £7200. They say it was not set up correctly by them and as such is not an ISA it currently is residing in a 0.25% e-savings account instead of the fixed 3.1% isa i thought it was secured in. They are offering me compensation of £243.11 which apparently is derived from comparing the sum if it had been invested into an alternative savings account for a period of 10years. They say this has taken into account the 3.1%. What should I do this amount seems pathetically small, I was expecting over £450 just for the 2 years at 3.1% never mind anything else, such as compensation for the tax I will have to pay and the fact I have lost 2 years worth of my tax free cash isa allowance for life or until the government decides to pull it. Help!!!

Pendle_Gazza

You've pretty much answered it yourself in that the offer doesn't cover interest for the 2 year period, and you'll lose out on over £7K being tax free in the future. I would be holding onto that letter, rejecting the offer, and taking the matter further myself. I'm no expert in what you could expect, but I'd be hoping for your offer to at least be tripled, which would all but cover the two years plus one additional.

Mickygg

I would hit them with you opened up the ISA obviously for a tax free benefit.

Say at higher rate tax you are in effect losing out each year to the tune of £115 based on £7,200 assuming a gross interest rate of 4.0% (therefore tax on this would be 1.6%) over the 10 year period, not including any compounded interest.

This means you have lost based on the above over £1,150 for higher rate tax or £575 for basic rate tax, and more if you include compound interest.

Therefore I agree with you that the amount should be at least tripled, or actually quadrupled.

EarthBoy

monime wrote: »

....They say it was not set up correctly by them...

It all depends exactly why it wasn't set up correctly. If they made a clerical error, or gave you incorrect information, then they should make up the interest for you. If it's been showing up on their systems as an ISA for the last two years, and now they have realised it shouldn't be an ISA after all, this implies more than a clerical error though. Perhaps you weren't entitled to an ISA at the time because you already had one for that tax year?

You need to find out more details about what happened.

monime

It all looked as if it had gone through correctly. I received the paperwork saying my account was open and I was able to log on to it on the web site. I did not have another account. After the first year I contacted them and arranged for another year of cash isa allowance to be added to the account, I received a letter to say this had been done and at the same rate. Again all seemed to be well. I was only informed there was a problem because they tried to transfer someone elses isa into my account. How incompetent can these people be? They have admitted it is their fault.:mad: