Bank quick to offer compensation for ISA mistake, so what is a fair deal?

bul15

In April 2012, I opened a Santander 2 year fixed ISA. I transferred various 'old' ISAs to it.
When I got the statement I noticed that the transfer from M&S was wrong. Instead of £3300, then entered £330. I rang Santander and they said that was a mistake and added £3000. I thought nothing more about it since the next statement showed the correct total amount.

After watching ML on tv saying to use the cash allowance for 2012/2013, I opened an ISA at the last minute. The intention was to deposit the 'new' cash I had into that and then to transfer that and another old ISA that was going to mature into the Halifax 2.5% fixed for 2 years for 2013/2014.

I have now found out that Santander added the £3000 into the account as 'new' cash thus using £3000 of my 2012/2013 allowance. They are saying that nothing can be done about it since it is a new tax year and wanted to know what it would take to put it right. I wasn't expecting this so didn't know the answer.

The Santander customer service person said they were going to suggest to their 'back office' that they offer me 2.5% interest on £5600 and I will get written confirmation.
I was told that if this is not acceptable then to let them know - I found this strange. I am waiting for this in writing.

I am assuming that since it went into the account as 'new' money and not a transfer that this still does not effect anything in the past, just the future. So I have lost all the interest that I would have got from it forever.
I can easily show that all the money I ever put in past TESSAs and ISAs stayed there and was never withdrawn.

So what is fair compensation?

innovate

I would not take this offer.

Due to their mistake, you have - - if it goes by their suggestion - - lost the ISA protection for some £2,640 (5,640 minus 3,000) for good.

On a conservative estimate of 3% AER, over a period of 20 years, the £2.6K would grow into £4,629.

Obviously it could be more if you keep the money for longer and if interest is more than 3% AER, or it could be lower - - but usually ISA savings are long term savings, as manifested by your transferring old ISAs, and making use of your ISA annual allowance.

They are offering you a paltry max £140 - - much of which you would have earned anyway if they had processed your transfer correctly! That's pretty outrageous.

The only settlement I would accept is

1. they must modify your ISA so it shows the £3K properly as a transfer. And allow you to deposit the extra money you couldn't deposit, into last year's ISA. I don't believe they cannot correct it - - - but if they cannot, ask for the full compensation for 20, 30 or however many years of lost ISA protection of the money you couldn't deposit because they had processed your transfer incorrectly.
2. all your costs for phone calls etc, and your time, to sort this out
3. a compensation for inconvenience

You have made no mistakes at all, therefore you should not suffer at all. All mistakes are with Santander.

bul15

Wow! thank you for your advice. I will let you know how I get on

MoneySaverLog

it could be a retirement pot so potentially 40 years of interest lost ;-)

Sensory

From my understanding of your post, Santander essentially used up £3000 of your overall lifetime ISA allowance, preventing you from depositing that amount yourself, forever.

I don't know what their systems are capable of, but they should be able to ignore the yearly ISA limit in exceptional circumstances. A few years ago I went to Halifax to close a bog-standard eSaver account, but the cashier accidentally closed my ISA which had a balance of over £12K. To rectify the problem, the branch manager immediately opened a new ISA and deposited the £12K, with interest, effectively bypassing the allowance.

Now Santander may prove unsympathetic if you never deposited any cash yourself in the 2012/13 year, as that would have indicated you were going to lose the allowance anyway; retroactively applying interest from the original transfer date would seem fair from their perspective.

When exactly did you find out about Santander's error? I apologise if I haven't fully undertood your situation correctly. My main point is that they should have the technical capabilities to bypass the limit if they have to.

jimjames

bul15 wrote: »

After watching ML on tv saying to use the cash allowance for 2012/2013, I opened an ISA at the last minute. The intention was to transfer the 'new' cash I had into that and then to transfer that and another old ISA that was going to mature into the Halifax 2.5% fixed for 2 years for 2013/2014.

I have now found out that Santander added the £3000 into the account as 'new' cash thus using £3000 of my 2012/2013 allowance. They are saying that nothing can be done about it since it is a new tax year and wanted to know what it would take to put it right. I wasn't expecting this so didn't know the answer.

So what is fair compensation?

I'm a bit confused by your post. At no point in it do you say that you tried to deposit the full ISA allowance for 2012/13. Is that correct? If they rejected your application because they had put money as deposit not transfer then that is a different matter and will be on record.

If you didn't use the allowance prior to April then you have lost it. If you hadn't used or tried to use the allowance then you haven't suffered any actual loss so I'm not sure any compensation is relevant.

Apologies if this isn't how it happened by it is from how I read your post with no mention of trying to use last years allowance (other than opening the account) and being told you couldn't. The 2012/13 allowance is gone now so opening an ISA and not putting any money in is completely irrelevant as you would need to have funded it prior to 5 April to use the allowance.

innovate

jimjames wrote: »

I'm a bit confused by your post. At no point in it do you say that you tried to deposit the full ISA allowance for 2012/13.

You are right, the OP didn't say they wanted to top up to the full 2012-13 allowance - - but I think they had every intention to do so. Just their intentions were thwarted by Santander saying the deposit exceed the allowance

bul15 wrote: »

.....I opened an ISA at the last minute. The intention was to transfer the 'new' cash I had into that ..........

jimjames wrote: »

If you hadn't used or tried to use the allowance then you haven't suffered any actual loss so I'm not sure any compensation is relevant.

If the OP had not tried to deposit, how would they have found out that they couldn't deposit?

Compensation is very relevant IMO.

jimjames

innovate wrote: »

If the OP had not tried to deposit, how would they have found out that they couldn't deposit?

Compensation is very relevant IMO.

The way I read it was that the OP has only found out this tax year that the transfer wasn't done correctly so last years allowance was partly used up instead. Mainly I'd understood it from the bit where Santander said they couldn't do anything as it was the new tax year that confused me.

Did Santander allow the remaining balance ie £5340 - £3000 to be deposited into the ISA or did they reject the full amount?

If there is no record of the transaction being attempted then it may be hard to demonstrate anything that would cause a loss. If this is all Santander's error then I completely agree that compensation is appropriate but it wasn't clear to me from the OP.

innovate

jimjames wrote: »

Mainly I'd understood it from the bit where Santander said they couldn't do anything as it was the new tax year that confused me.

I read this as they tried late on Friday, April 5 2013 [after some Martin Lewis telly appearance in the evening], and things didn't work.

jimjames wrote: »

Did Santander allow the remaining balance ie £5340 - £3000 to be deposited into the ISA or did they reject the full amount?

Good Q

jimjames wrote: »

If there is no record of the transaction being attempted then it may be hard to demonstrate anything that would cause a loss.

Yes, absolutely. Though I read it that a deposit had been attempted, and it was the rejection of that attempt that brought the full problem to light.

bul15

Hi All,

Thank you for your updates.
Inovate assumed correctly in the first instance.

To clarify some of the questions:

ML programme basically said that as long as you opened the 2012/2013 account you then still had time to add the money in. I have now deposited the 'new' money into the Halifax but expecting it to fail.

I noticed the error the day after the programme, so in the new tax year.
The error was not easy to spot since the statement showed all the transfers were credited, then debited and then credited again except the £3000. At the time it didn't mean anything to me. I phoned to query why it was different for the £3000.

Santander didn't say that I could deposit the remaining amount into their account. This just wasnt dicussed and they didnt give me that option.

I phoned Santander to talk about the fact that I noticed the 'difference' on the statement and then to see if they could fix it. I just told them that I was going to deposit money into the Halifax.
I was on the phone to them for 30 mins while the CS checked things and spoke to 'others'. I think they just know it will fail.

I too do not understand why they cannot correct their mistake.

I posted the query, just to be prepared so I would know what to do once (and if) the deposit of the new money fails.

jimjames

bul15 wrote: »

Hi All,

Thank you for your updates.
Inovate assumed correctly in the first instance.

To clarify some of the questions:

ML programme basically said that as long as you opened the 2012/2013 account you then still had time to add the money in. I have now deposited the 'new' money into the Halifax but expecting it to fail.

I'm still not totally clear. For an ISA to be valid for 2012/13 it has to be opened and the money deposited by 5/4/2013. Did you add the money to your new Halifax ISA before 5/4/2013?

If you have done this already with Halifax then that should be fine. Santander can fix their error and your money will get the interest it should. As such you have not suffered any loss although they have caused a lot of hassle which they should compensate for but this is likely to be a smaller amount.

If Santander don't/can't resolve it now then it is likely to be picked up by HMRC at which point they will need to investigate. Halifax won't be able to "fail" it as they have no knowledge of any other ISAs you have opened.