H2B ISA Transfer Shambles

ref2468

Appreciate any advice on the following which Ill try keep as brief as possible...

I opened a H2B ISA with Halifax at the start of December and deposited the maximum £1200. By chance, in mid-December I came across a better deal elsewhere with another provider who I already hold a 'old' cash ISA account. Following discussions I decide to go through the transfer process - very much like the current account switch which I have done several times.

All appeared to be going fine until the end of the month when the new provider said my transfer had been rejected because I had attempted to transfer more than the maximum of £1200 - I immediately contacted the bank and asked what had happened. They explained the transfer had come through as £1202.50 to which I replied this could only have been as a result of interest accrued. They explained there was nothing they could do and I needed to contact the Halifax to see how to deal with the interest amount before 're-attempting' a transfer. I did so but likewise the Halifax said they had followed procedure in accordence with HMRC policy in relation to a 'full transfer'.

As the transfer was rejected the funds have been sent back to Halifax but as the ISA was closed (as per transfer regulations) the money has now been sent to me as a cheque! I have lots of questions I could ask as I'm sure you can understand but fundamentally I want to know:
- how I could have prevented such a scenario?
- whether I am in the 'wrong' in anyway?
- if I am now allowed to start a new H2B ISA account and deposit the maximum £1200?

I know with the current account switch service there are terms in place to protect customers who lose out as a result of any errors during a switch - does anyone know if this is the same for ISA transfers?

Thanks in advance,

TheBanker

I've not dealt with ISA transfers for a few years, but the old bank has to tell the new bank how much of the balance is contributions (by year if there is more than one year's allowance being transferred) and how much is interest. Either Halifax have cocked up, or the new bank have not dealt with the instruction correctly.

Just one question - the "old" cash ISA you mentioned, have you subscribed to it this year?

Either way, one or other of the banks should be able to help you sort this out, but you might need to try to speak to an ISA specialist.

colsten

ref2468 wrote: »

I opened a H2B ISA with Halifax at the start of December and deposited the maximum £1200. By chance, in mid-December I came across a better deal elsewhere with another provider who I already hold a 'old' cash ISA account.

Can you name that other provider please as nobody here is aware of any provider that pays more than 4% for an HTB ISA?

The problem you ran into should not have happened because you didn't want to open a new HTB ISA, you just wanted to transfer and existing one. The initial deposit max does not apply, so whoever that provider is don't know their ISA rules (https://www.helptobuy.gov.uk/help-to-buy-isa/how-does-it-work/)

If you are losing out as a result of this mess, you should claim compensation from that new provider as it is them who made the mistake. In theory you can open a new HTB ISA as the old one was effectively voided but it would be cleaner if that new provider of yours sorted it properly.

As to your existing ISA: presumably the interest rate is pretty dire. Are you aware that you can get massively better interest in non-ISA accounts, for some £50,000?

ref2468

Thank you for your replies.

The provider is the Newcastle Building Society - I didn't want to over complicate things above but the only reason it is better for me is because of a previous years ISA subscription (I haven't paid into any cash ISAs this year as I was specifically waiting for the details to be released regarding the H2B ISAs). By transferring the HSB ISA from the Halifax to NBS I found I would be allowed to deposit into both ISA accounts as they were with the same provider (as per ISA regulations in the same tax year). In doing so I receive a 1% bonus per month on my 'old' cash ISA for depositing and not withdrawing.

You're right I could quite easily transfer into current accounts etc but I have maxed out most of the regular savers, high paying interest accounts. And more so, the cash ISA is the 'Big Home Saver' (no longer available) whereby I qualified for £1000 cashback should I take a mortgage out with the NBS. I realise it might work out cheaper in the long run with another provider but I wanted to keep my options open for when I cross that bridge hence why I haven't transferred the money elsewhere.

As per my suspicions it sounds like its the Newcastle at fault. I have written a letter to them and will feedback as/when I hear back. Just to clarify as per the link you sent - have you come across any specific T&C in relation to transfers?

Thanks again,

ref2468

Also just to confirm the process to open the account which I was instructed by the adviser over the phone...

- Apply for the H2B ISA online (as I already had an account with them)
- At the end of the application print and send the transfer forms requesting a full transfer (to be completed within the 20 days)
- The adviser confirmed I would HAVE to close the Halifax account to fulfill ISA regulations in an individual tax year


When it came to speaking with a separate adviser following the 'failed transfer' they said I should have applied for a 'partial transfer' for £1200. I questioned how an earth I was supposed to know this would cause an issue! The reply was I would need to 'sort it out with the Halifax'...

colsten

ref2468 wrote: »

You're right I could quite easily transfer into current accounts etc but I have maxed out most of the regular savers, high paying interest accounts.

you got over £50K in cash and that's still not enough for a deposit?

ref2468 wrote: »

Just to clarify as per the link you sent - have you come across any specific T&C in relation to transfers?

. Yes, that's why I posted the link. It's clause 6.5 and following of the Scheme Rules.

ref2468 wrote: »

Also just to confirm the process to open the account which I was instructed by the adviser over the phone...

- Apply for the H2B ISA online (as I already had an account with them)
- At the end of the application print and send the transfer forms requesting a full transfer (to be completed within the 20 days)
- The adviser confirmed I would HAVE to close the Halifax account to fulfill ISA regulations in an individual tax year

that makes complete sense

ref2468 wrote: »

When it came to speaking with a separate adviser following the 'failed transfer' they said I should have applied for a 'partial transfer' for £1200.

that makes absolutely no sense. Although it is quite possible that they programmed their system that way because the initial deposit for a new HTB ISA is limited to £1,000, and an additional monthly deposit of £200 is allowed in the same month. A £1,200 limit makes sense when transferring from a non-HTB ISA. But that limitation must not apply to the transfer of another HTB ISA.

It is totally and utterly stupid to expect people to request an HTB ISA transfer in 2 lots - not least because that way they would force you to end up with 2 HTB ISAs, which is not allowed under the Scheme rules, even for a short period of time.

ref2468 wrote: »

I questioned how an earth I was supposed to know this would cause an issue!

Precisely. NBS' very own T&Cs state:

Transfers of current and previous year’s ISA subscriptions from other ISA’s are permitted and are subject to the Help to Buy: ISA Scheme Rules. Transfers are subject to the customer not holding two Help to Buy: ISAs at the end of the transfer process.

But they wanted to force you to do a partial transfer first, thus forcing you to break the scheme rules.

ref2468 wrote: »

The reply was I would need to 'sort it out with the Halifax'...

that's a totally stupid reply.

You did nothing wrong, but NBS certainly did.

ref2468

Thanks Colsten for such a comprehensive reply. This was exactly my thoughts but I just wanted to confirm.

I've now written a letter of complaint and sent to NBS. Any ideas what (if anything) I might get out of it? Being honest I would like the ability to invest the £1200 and 'top up' with a further £200 this month (hence would be back in the position I was expecting originally) - do you think this will be allowed as a result of their failure?

I'll update on this board when I hear back. Greatly appreciate all and any advice.

TheBanker

If you don't get the answer you want, have a read of chapter 11 here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/459781/isa-guidance-notes.pdf then ask one or other of the banks involved to supply you with a copy of the Transfer History Form. Then read paragraph 10.31c which explains how the bank responsible for the error can fix it.

These notes relate to Cash ISAs but the rules are the same for H2B.

Good luck!

Ed-1

Ultimately which bank/BS is at fault depends on whether the Newcastle BS were notified that the ISA to be transferred in was a Help to Buy ISA as that is crucial.

Transfers from Help to Buy ISA to Help to Buy ISA are not subject to any limits as long as you do not hold 2 Help to Buy ISAs following the transfer. Cash ISA to Help to Buy ISA are subject to limits.

If Halifax didn't notify the Newcastle it was a Help to Buy ISA originally they are at fault. Otherwise, it's the Newcastle.

ref2468

Thank you to all for replying.

I sent a letter to the Newcastle BS and they were very quick to deal with the complaint (within 2hours of receiving!). They admitted all liability stating the transfer was rejected by an 'internal technical error which is being looked into'. Thereafter I was sent the letter explaining the transfer had been rejected which 'should not have sent and this was human error to which staff are receiving additional training.'

They asked me to send all the funds electronically (having banked the Halifax cheque) and this was later processed into my Help to Buy ISA. They explained I was now back in the position which I should have been on the 22nd December had the transfer gone through as normal. I am now free to add a further £200 into the account this month.

In addition they have backdated interest and provided £50 as a gesture of goodwill for their combination of errors. Good result in the end - thanks again for your advice.