Are Cash ISAs more trouble than they're worth?

MrMartyn

I used to have a TESSA with "Firm A" (I'd rather not name them). This eventually became a TESSA-Only-ISA. I'll call this "Account 1A". Meanwhile, I wanted to save some more cash. As far as I know, I was not allowed to deposit any more money into Account 1A, so I opened a new Cash ISA ("Account 2A") with the same provider. The original account "Account 1A" eventually became a bog-standard "Cash ISA", so I then had two Cash ISAs with the same provider ("Firm A").

The years passed by and the interest rate dwindled to a pittance (something like 0.5 percent, maybe even less). Eventually I got it together to tranfer both accounts to a new provider ("Firm B"), which was offereing about 3 percent interest (still miserable, but relatively good compared to the old provider). Part of the motivation was the idea of simplifying my affairs by consolidating both cash ISA accounts into one new cash ISA account, so I would only have one set of paper work arriving each time. Bear in mind I only had about 10 grand in Account 1A and 3 grand in Account 2A, so the new account would only have 13 grand.

I spent a good few hours carefully completing the necessary transfer forms, making copies for my own reference, and posting the forms & ID off to the new provider ("Firm B")

To my great annoyance, the new provider sent me the details showing that I now have 2 separate pots of money with them, each with its own balance and reference number. So it looks like they have set up 2 separate accounts. WHY?!!

To further annoy me, not long after I had sent proof of ID to Firm B in response to their request, I have now received a second request for the same thing, probably in reference to the other account/pot-of-money. So I am now in the ridiculous situation of having two accounts of the same type with the same provider (but probably only one compensation-scheme limit!!), which means twice the paperwork, twice the aggro, and for no benefit. I find this very annoying. I tried to phone Firm B yesterday to complain about this, but gave up after waiting about 15 minutes and still not getting through (no indication of where I was up to in the call queue either). This was in the daytime on a working day, which I would expect to be quieter than evenings or weekends for a product that is available to the general public, since most of them were probably at work during the time I phoned.

I am now considering writing to Firm B to demand that they consolidate the two accounts into one. Knowing what financial service providers are like, I imagine they will probably drag me over the coals for a few weeks/months before consolidating the accounts (if they even agree to do so).

Considering that I only have 13 grand in these accounts, is it really worth all this hassle?

Should I just withdraw the 3 grand from the smaller of the two accounts and close it?

If I wanted to save any more money in a Cash ISA for this (or future) year's allocation, would they open yet another account? This situation is a farce.

Thanks for reading.

Disclaimer: I am not an expert. My comments are my opinions only and should not be taken as advice. If you act on anything I post here you do so entirely at your own risk. I do not accept any liability for anything I post here.

Voyager2002

Yes: the trouble is probably not justified by the pitiful interest that is paid.

In the past rates were higher, and they might be higher in the future. I have had good experiences transferring cash ISAs to and then from Aldermore (then called Ruffler Bank), so maybe you should look for an ISA provider with a good reputation for customer service.

psychic_teabag

I can't say I've ever found cash ISAs to be much trouble. Yes, rates are not as high as they have been, but I may as well keep all of it rather than passing some onto the tax man. But then I'm currently a higher rate taxpayer, and I always try to chase the highest rates anyway. If you don't much care about getting the top rate, I suppose it doesn't matter so much if you are losing 1/5 (or more) of the interest again.

If either of the accounts is fixed term, you would have approach it as a complaint that this is what you wanted done in the first place, since you can't easily transfer them now. In that case, none of what follows is relevant.

Assuming both accounts are instant-access, you should be able to ask for a transfer from one to the other. (Sorry, yes, another form to fill in, though there may be someone in a branch who can fill it in for you.) Instant-access ISAs can be transferred whenever you like, as often as you like.

Or you could go to another provider and get them to transfer both accounts in. This time you would make it quite clear that you want them both transferred to the same account. (The process is probably to first open the account, then fill in both transfers to go to this one account.)

If you're not planning on paying any money into an ISA this year, you could just withdraw the £3k from one account and pay it into the other. This will use up half of your annual cash ISA allowance, but if you hate paperwork that much, you might decide it is worth it for you. Also, it would mean that the second account would be the only one you can add more to this year, but that's probably what you want anyway.

If you don't do that, you can choose to pay this year's allowance into either of your two existing ISAs, or open a third. It is possible that provider B has a policy of having a separate account for each year's ISA money. I don't know off-hand any that do it that way, but for example some ISA S&S providers seem to keep the money separate.

thenudeone

I think you have just been unlucky with Firm B. I have successfully consolidated different ISAs into 1 account and vice versa.

Were the new accounts fixed-rate or fixed-period accounts? These often have conditions meaning that only 1 deposit can be made per account. So they may have opened a new account when the second traansfer occurred.

It's not really a problem that there are two accounts. You're getting the new (better) rate on all your money for the period you expected. It doesn't cause any problems. I wouldn't worry about it.

In answer to the post's title - Yes, they are clearly worth it (unless you aren't a tax-payer and don't expect to be one)

If you and a partner had invested the maximum allowable in ISAs (and TESSAs before that), you would now have over £150k in savings. Even assuming a conservative 3% interest and that you're both basic rate tax payers, you're saving £900 a year in tax. That's worth it IMO!

innovate

MrMartyn wrote: »

So I am now in the ridiculous situation of having two accounts of the same type with the same provider (but probably only one compensation-scheme limit!!), which means twice the paperwork, twice the aggro, and for no benefit.

Sorry, I can't quite follow you - - - for years, you had 2 accounts with firm A, paying pityful interest. Now you have 2 accounts with firm B, earning a multiple of the interest you got before. Surely that is a benefit?

You can probably ask your new provider to combine the 2 accounts - it seems strange that they put your money into more than one account. On the other hand, you could just leave things as they are and combine your ISAs on your next transfer.

As to the compensation scheme: it doesn't work per account, it works across your total deposit with the same financial institution. The cover is £85K per person per financial institution - - so unless you have more than £72K in other accounts with them, and they are indeed part of the FSCS scheme, your deposits are fully covered.

CLAPTON

13k at 3% is about 420 per year

whether is worth a few minutes of your time every year or so is up to your and your normal hourly rate

Colin297

CLAPTON wrote: »

13k at 3% is about 420 per year

whether is worth a few minutes of your time every year or so is up to your and your normal hourly rate

420 is a very good weekly wage, let alone hourly rate lol

TS, if you lose you patience you should check out the online accounts (not isa) that offer 2.5-2.8%. Easy access etc. Halifax and Santandeur esaver accounts.

pqrdef

Yes, the transfer process is a botch and a nightmare. The taxman wants it done bank-to-bank, but no satisfactory cheap automated process has been established. So the job is done manually, costs too much, takes too long, and is mistake-prone.

I've heard that BACS has something in the pipeline, but it's understandable that the banks wouldn't want to commit money to software development when the Chancellor reserves the right to drop the scheme or change the rules at the drop of a hat.

I suppose there would have been 4 options in principle, though not necessarily all available with all accounts

1) open an account without funding, get the account number, then fill in 2 transfer forms, quoting that account number

2) open one account with a transfer, get the account number, then do the 2nd transfer, quoting that account number

3) open one account with 2 transfers, listed on the same form - some forms allow for that, but too many don't

4) fill in two open-with-transfer forms, in which case they're unlikely to have the wit to combine them even if you put the forms in the same envelope

It gets worse with partial transfers.

And the opening and transfer forms are usually inadequate and confusing, partly because they follow HMRC guidelines.

But nothing is going to get fixed, so we just keep on muddling through. A lot of people now have ISAs all over the shop. And the banks take advantage, because the average interest rate now paid on existing ISAs is about 0.pathetic%. Another reason why they aren't interested in improving the transfer process. Another reason is that the big banks aren't interested in savings any more.

innovate

pqrdef wrote: »

Yes, the transfer process is a botch and a nightmare. The taxman wants it done bank-to-bank, but no satisfactory cheap automated process has been established. So the job is done manually, costs too much, takes too long, and is mistake-prone.

I've heard that BACS has something in the pipeline, but it's understandable that the banks wouldn't want to commit money to software development when the Chancellor reserves the right to drop the scheme or change the rules at the drop of a hat.

It's half as bad as you make out - yes, there are the occasional bad errors but the vast majority of ISA transfers goes smoothly. There's also a very clear law, and accompanying guidelines, for ISA transfers. If something goes wrong, people can get handsome compensation if they can be bothered to ask for it.

The planned electronic transfer of ISAs is mentioned in this BBA Press Release

MrMartyn

Thanks for all the comments on this thread.

I've found a new provider who is offering an online account with a slightly higher interest rate than the provider I had just transferred to (they lowered the rate within days of me opening the account!). Plus, on their transfer form there is a space to put the new account number. I phoned them (this afternoon - Sunday) and quickly got through to a human-being (unlike my old provider whose phoneline has a message stating that they are closed on a Sunday). She told me that I can open an account online with a zero balance, and then use the new account number on the two transfer forms that I would have to complete for my existing two accounts. Apparently the transer form has a box for the destination account number, so I can be sure that both transfers will go into the one new account, which sounds perfect!

My only question now is: Can I open this new account given that I've only just opened the (two) new accounts with the existing provider?

Thanks,
MrMartyn

Disclaimer: I am not an expert. My comments are my opinions only and should not be taken as advice. If you act on anything I post here you do so entirely at your own risk. I do not accept any liability for anything I post here.

innovate

MrMartyn wrote: »

My only question now is: Can I open this new account given that I've only just opened the (two) new accounts with the existing provider?

You can transfer your ISA(s) as often as you like. Transfers do not count towards your annual allowance.

The only things to keep in mind

1. if you want to transfer any new money deposited in the current tax year, you must transfer all of it
2. use the official transfer process