Interest Issue - Fixed Rate Cash ISA

Kings_Knight

Got a bit of a problem with a bank to do with interest on a fixed rate Cash ISA.Owing to delays getting onto this site the issue has moved on but I wanted to get some views on what has happened. So briefly this was an ISA transfer and they have docked me several days worth of interest owing to a cheque being used for the transfer. Am aware of clearance issues on cheques but this is the issue I saw. The bank made their best projections based on electronic transfer being used. That was the headline rate which everyone sees so I expected to get 365 days at the headline rate. They made several references to electronic transfers in the blurb but that was in the context of a customer transferring direct to them from their own account. However this was an ISA transfer and I didn't have any involvement in that except for completing an ISA transfer form and sending it to the bank. I found that the blurb was quite silent on how ISA transfers would be dealt with actually. The bank did however make the statement that they would deal with the matter on my behalf. I don't know about you but if someone wants to act for me in something then I expect them to act in my interests. Well certainly not against them. It dawned on me that they had acted against my interests by asking for the transfer by cheque when they well knew that electronic transfer was faster and would have got me the full 365 days worth of interest. I was pretty furious about that and basically I have complained to them and asked for the missing interest days and some compensation. I await their response. I would be interested to know if anyone else has seen this anomaly. Has anyone else complained . I can imagine that this is a fairly common issue actually given all the ISA transfers that go on. When one thinks about it, it is a way the ISA provider can get away with paying less than advertised. I think they say oh yea we'll take advantage of the way transfers are dealt with by being a bit less than informative on how the transfer will be done and sneakily asking for a cheque so that they can take off however many business days are knocked off by the cheque clearance and they end up paying less interest than a customer expected. So anyone had such a problem ?

eskbanker

When transferring between cash ISAs, the best practice guidance adopted by the majority of the industry indicates that, regardless of how long a cheque takes to travel from one institution to another, interest should be paid by the first provider up to the day before the date of the cheque and by the second provider from the cheque date onwards.

See https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/693198/Appendices.pdf

Do you have clear evidence that there is a gap between interest paid on the two accounts and if so, which providers were involved?

Kings_Knight

It wasn't a cash isa to cash isa it was a stocks and shares isa to cash isa. The point I was addressing if it wasn't well made was this. It was a fixed rate for one year. One year being 365 days. They started the account when the old providers cheque was received but are only giving me 361 days interest period. So 4 days missing. This was due to the cheque clearance. They could have asked for the transfer to be done electronically but they did not. I asked myself why would they not do that. The answer I come up with is that they took advantage of the cheque clearance issue to knock off 4 days of interest. Therefore they were not so much acting on my behalf but on theirs. So is this an issue you have come across?


On a different note - is there not an email that gets sent out if someone has replied to a post 'cos I didn't realise you had replied ?

eskbanker

Kings_Knight wrote: »

They could have asked for the transfer to be done electronically but they did not.

How do you know they could have asked for electronic transfer? Many ISA transfers are still conducted via cheques and naturally most involve two parties, so it may have been the first provider who insisted on that mechanism rather than the receiving institution?

Kings_Knight wrote: »

I asked myself why would they not do that. The answer I come up with is that they took advantage of the cheque clearance issue to knock off 4 days of interest. Therefore they were not so much acting on my behalf but on theirs.

I think you're taking their words too literally and reading too much into them! When they say they'll conduct the transfer on your behalf, they're simply saying that they'll do it for you, not necessarily that they'll do it in the way that's most advantageous to you (even if they had a choice).

Kings_Knight wrote: »

So is this an issue you have come across?

Sorry, no, I've never transferred from S&S ISA to cash ISA.

Kings_Knight wrote: »

On a different note - is there not an email that gets sent out if someone has replied to a post 'cos I didn't realise you had replied ?

There is the facility to subscribe to a thread, via a button at the top of thread when open (or perhaps an option within the 'thread tools' menu, depending on exactly which interface you're using).

Kings_Knight

Hi
Point 1 - I do not specifically know that they could not have handled an electronic transfer but it is highly likely that they could have. The old provider could have transferred that way if they had been given bank details ( viz by BACs ). I did ask them. They give plenty of info about electronic transfers in their blurb but that is confined to transactions from and to a customers nominated account. If it does turn out that for some odd reason they could not have asked for it electronically then I would take up with them the way they give their illustrations. We shall find out what we will find out.
Point 2 - of course I am taking them literally. That is what they say .. so as far as I see it that is what they mean. This is essentially a contract.
Point 3 - noted but it's not so much to do with S&S to Cash ISA - its the fixed rate/period. That is part of why I was posting - to see if anyone had a similar issue with a fixed rate ISA.
Point 4 - oh right I see the button I'll try that - thanks

eskbanker

Kings_Knight wrote: »

Point 1 - I do not specifically know that they could not have handled an electronic transfer but it is highly likely that they could have. The old provider could have transferred that way if they had been given bank details ( viz by BACs ). I did ask them. They give plenty of info about electronic transfers in their blurb but that is confined to transactions from and to a customers nominated account. If it does turn out that for some odd reason they could not have asked for it electronically then I would take up with them the way they give their illustrations. We shall find out what we will find out.

I'm not sure you get the point I'm making - it's not in dispute that two financial institutions can transfer funds electronically between each other, but some choose not to do so specifically for ISA transfers. The process for ISA transfers between providers clearly differs from moving money in and out of the ISA umbrella to and from a non-ISA account.

Kings_Knight wrote: »

Point 2 - of course I am taking them literally. That is what they say .. so as far as I see it that is what they mean. This is essentially a contract.

I was referring specifically to your interpretation of 'acting on your behalf' to mean 'acting in a way that maximises your return' rather than simply 'performing the transfer for you with your authority'.

Kings_Knight wrote: »

Point 3 - noted but it's not so much to do with S&S to Cash ISA - its the fixed rate/period. That is part of why I was posting - to see if anyone had a similar issue with a fixed rate ISA.

Are you basing your position on 'lost interest' on facts at the end of the term (once interest has actually been paid) or supposition at the beginning of the term (perhaps based on transaction posting dates)? Do the Ts & Cs of the account clarify exactly when the one-year period starts, as it could presumably be date of account opening rather than once funded?

Which bank and product is it?

coyrls

How much does your 4 days loss of interest amount to?

Kings_Knight

point 1 - the question would be why would they choose not to do so specifically for ISA Transfers. If there is a good reason I'll find out as they will no doubt be very happy to tell me and I will then re-examine their blurb to see what if anything was said about it.
Point 2. noted
Point 3. I am basing my position on a fact of 361 days worth of interest which at the advertised rate means less interest than expected.

I not really happy to say what bank it is at this stage.

Kings_Knight

about £7 and i need to add more words ........

eskbanker

Kings_Knight wrote: »

point 1 - the question would be why would they choose not to do so specifically for ISA Transfers. If there is a good reason I'll find out as they will no doubt be very happy to tell me and I will then re-examine their blurb to see what if anything was said about it.

As I said earlier, there are two parties involved, so you may not find out whose decision it was, but you can't simply assume it was the sole responsibility of the receiving provider, unless they've said that they chose to use this mechanism.

Kings_Knight wrote: »

Point 3. I am basing my position on a fact of 361 days worth of interest which at the advertised rate means less interest than expected.

I take it from this slightly evasive reply that you've done the transfer recently rather than a year ago then? Have they explicitly said that they'll pay 361 days worth of interest or have they said that the maturity date is 361 days after the money was paid into the account?

masonic

Fixed rate accounts, like all accounts, calculate interest daily on the cleared balance of the account. If you open a fixed term account, then it will state within the terms whether the fixed term begins once cleared funds are received, or if the term begins immediately upon account opening.

In the first case, the account would have been open for 369 days and you would have received 365 days interest.

In the second case, the account would have been open for 365 days and you would have received 4 days interest on a £0 balance, followed by 361 days interest on the transferred balance when it cleared.

In both cases, the interest rate is the same.

There is no requirement for a S&S ISA to be transferred electronically and most S&S ISA providers will not transfer funds electronically. There is no reason to think the bank is at fault in any way.

Edit: crossed with eskbanker