Bank unwrapped some of my ISA by mistake

cg54321

I transferred 5340 pounds into my ISA towards the end of the last tax year. I did the HMRC declaration over the phone, but the guy at the bank forgot to tick the box to say it had been done (they have admitted it was their mistake). This triggered the removal of the money from my account after 30 days, which last week turned up as a cheque at my house. They did not contact me to warn me that the money would be removed.

I have been told that there is no way to put the money back in under last year’s ISA allowance, so I have lost that ISA allowance forever (and had planned to put money in this year anyway). The account had 3.3 % interest (which includes a 2.8% bonus for 1 year). I would have then transferred to a different ISA account to get good interest.

They offered my 135 pounds in compensation, saying this was based on 5 years. I didn’t accept as the number as seemed plucked out of nowhere. Based on the current interest rate I would have saved 188 pounds in tax over 5 years on this money and I don’t currently have a non ISA account that gives me as much as 3.3%

I really liked my bank and have had excellent service from them until now and probably would have accepted their offer if there had been some logical maths behind it. I just wish they had tried to contact me before the money was removed, so this hadn’t happened (and it is never good to see that amount of money missing from your account without an explanation, which was the case at first)

I’m keen to hear from anyone who has experienced anything similar and what sort of compensation they got and what is reasonable to ask for? Also suggestions on where to put this money now? Does anyone know why the HMRC don’t allow money to be put back in an account, when it is clearly the bank and not me the customer that made the mistake?

lisyloo

Make a formal complaint and if you're not happy then escalate to the FOS.
It's a good idea to be clear on what you DO want.
Personally I keep my money there for decades, so I'd be doing maths based on several probably 4 decades.

thumshie

cg54321 wrote: »

Does anyone know why the HMRC don’t allow money to be put back in an account, when it is clearly the bank and not me the customer that made the mistake?

They do(to an extent) allow it:

10.31c Cash withdrawn from an ISA in error by the ISA manager may be reinstated without
reference to SSO where the investor (or the investor’s agent) gave the manager
clear instructions and the manager misinterpreted these instructions and
 withdrew money from (or closed) the investor’s ISA in error, or
 withdrew money from (or closed) another investor’s ISA in error. (For example,
John Smith instructs the manager to remove £3,000 from his ISA and the
manager instead removes £3,000 from James Smith’s ISA and pays it to John
Smith.)
However, managers may not reinstate where the investor's (or the agent’s)
instructions were unclear or were capable of being misunderstood.
Managers should retain evidence justifying their decision to reinstate cash
withdrawn from an ISA in error without reference to SSO with the investor’s ISA
records and make them available at the next audit to the HMRC auditor.

http://www.hmrc.gov.uk/isa/isa-guidance-notes.pdf

Comes down to whether your instructions were 'clear', and if there are different rules concerning the fact it wasn't a withdrawal?

steady__eddie

Sorry to hear about your predicament cg 54321 but you are not alone. Events like this have happened to me a few times including one time when I was underpaid interest. I queried it and they offered to send me a cheque re the underpayment. I politely told them to deposit the cheque in my ISA a/c. which they told me they couldn't do. I quoted the relevant regs, some of which thumsie has outlined. Again no joy but after going through the formal complaints rigmarole with mention of escalation, I was successful.
If you have a record of their admission that it was their mistake then go for it, there may be a bit of work involved but I consider that it would be worthwhile.

cg54321

Thank you for your replies. Thumshie, many thanks for the link. It seems the people at the bank have not been completely informed when the said the money can’t be put back in. They had no instruction from me at all about this money (it was meant to sit there and quietly make interest). Its removal was triggered by the bank failing to tick the box that said I had made HMRC declaration and also not checking with me why there was apparently no declaration. I did have a brief conversation with the FOS and they also appear not to know that the money can go back in under some circumstances. I tried to call HMRC saving advice line and was on hold twice for half an hour and gave up (I’m wondering if there is anyone there…).

Thank you too lisyloo, I will think carefully about what I’m willing to accept. Steady-eddie, sorry to hear you have had similar problems- it would be so much better if these things didn’t happen in the first place.

I have to say that the bank have twice helped me move money around from several accounts and made the process very easy and has meant I have received good interest (and the man who must of made the mistake was very good in every other thing that was done over the phone that day). Two days before this happened I was telling a friend how great their customer service has been with me!

le_loup

Don't let their "help"and "good customer service" put you off getting what is yours. Because we are surprised when a bank gives good service does not mean that we should not expect it!
My understanding is that, if the bank makes the mistake they are permitted to put the cash back into an ISA. Hold out for it.

GeorgeHowell

Threaten to make is a formal complaint, if you haven't already. That gives them a lot of hassle. Put it in writing and throw in the words Financial Ombudsman somewhere -- that potentially gives them even more hassle. Ultimately if the nature of your complaint makes it more troublesome to them than putting right their mistake does, then they will do the latter. Bureaucracies will almost invariably take the line of least resistance if allowed to.

cg54321

I have already rejected their first offer (I lost a lot of sympathy with them when the woman I spoke in the 'serious complaint department' appeared to fail at being able to calculate the lost interest) and will take this further. If they had given me a fair and rationalised offer, I probably would have accepted it there and then. I am persistent when I need to be, especially when their ISA specialist team seem unaware of the guidelines that thumsie linked above.
Many thanks again eveyone for your thought, you have been most helpful and logical.

Xbigman

Don't forget that when they worked out what you'd lose over 5 years they probably only allowed 3.3% in the 1st year, then dropped it to .5% for the last 4 years (the bonus had gone). Does that help make sense of the £135 figure?



X

innovate

lisyloo wrote: »

Personally I keep my money there for decades, so I'd be doing maths based on several probably 4 decades.

Absolutely agree - and it's not just a matter of how much more (compounded) interest you would get in an ISA, but also the fact that once you lost your ISA wrapper on that money, you lost it forever.

You never know, may be the (compounded) interest on this money would, if you couldn't have it in an ISA, some day make the difference between you paying basic or higher rate tax, or between paying tax and not paying tax. Some quite eye-watering sums of money could be involved.

It is completely ludicrous that a bank think they could get away with £135 for such a grave error. Nothing but re-instating your ISA, backdated to the date of error for interest purposes, is acceptable. You got the law 100% on your side.

You might still want to accept £135 (or something appropriate, in your view) - but that would be compensation on top of the properly re-instated ISA, to re-imburse you for the time you had to spend to make them do the job they should have done in the first instance. I would insist on compensation if I were you - - banks will charge you huge amounts of money if you make an error (such as accidentally going over your overdraft etc), so what's good for them is good for us. They quite willingly pay, if you insist.

Yogibear

Nationwide did this to me last week they closed my E- ISA with 20k in it and opened a flexeclusive Isa where you cant transfer money and they put the 20k in an account paying 0.10 and didnt tell me still not calmed down useless shower of b

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s:mad: