ISA Transfer Delay

Matthew2018

Are the financial organisations profiting from our money by artifically delaying any ISA transfer?

I am trying to transfer my Cash ISA to a Stocks and Shares ISA.

According to a statement I received last Saturday the money left my Cash ISA on 3 April and interest was calculated up to that date.

When I phoned last Monday I found that a cheque had been received by the S&S financial company. As of today Friday 12 April the money is still not in my S&S ISA. That's 10 days and counting (8 working days) where I have not had access to my own money.

It is not the first time that I have had delays in transfering an ISA.

The use of cheques to transfer between two financial organisations seems to be used for unnecessary delay. Surely these big financial organisation could use bank transfer.

This case is transferring from Natwest to IG. Others have been between Santander and Virgin.

Have any other people had delays in transfering their ISAs.

Is there anything we, the ordinary punters, can do about this?

Reed_Richards

If you do a cash ISA to cash ISA transfer then interest is often back-dated if there is a delay.

masonic

Matthew2018 wrote: »

Are the financial organisations profiting from our money by artifically delaying any ISA transfer?

No, how could it profit the new ISA manager to delay taking money from the old ISA manager? They will be just as eager to get hold of your cash as you are for them to receive it.

The use of cheques to transfer between two financial organisations seems to be used for unnecessary delay. Surely these big financial organisation could use bank transfer.

Cheques are used in cases where the ISA paperwork is transferred by post, because it keeps everything together. Several organisations have implemented electronic systems and can do paper-free transfers. S&S ISA providers are slow on the uptake (it's far more common among cash and IF ISA providers)

This case is transferring from Natwest to IG. Others have been between Santander and Virgin.

Have any other people had delays in transfering their ISAs.

Is there anything we, the ordinary punters, can do about this?

There is a strict time limit of 8 working days on sending the funds for a cash ISA to cash ISA transfer and applying those funds to the new account (see this page), and more relaxed limits on transfers to and from other types of ISA. If you are waiting an unreasonable length of time, say, more than 16 working days, you could have grounds for a complaint.

Matthew2018

masonic wrote: »

No, how could it profit the new ISA manager to delay taking money from the old ISA manager? They will be just as eager to get hold of your cash as you are for them to receive it.

Not correct. My money is either still with the old ISA manager or with the new ISA manager. Either way it is not in my account. While it is with the old manager it is earning them interest. If it is with the new ISA manager it is earning them interest. But I cannot use it.

masonic wrote: »

Cheques are used in cases where the ISA paperwork is transferred by post, because it keeps everything together. Several organisations have implemented electronic systems and can do paper-free transfers. S&S ISA providers are slow on the uptake (it's far more common among cash and IF ISA providers)

There is no reason for them to speed up the process since money stays in the old manager's pending account until moved to the new manager's pending account. Both managers have access to unallocated money by one degree or another until the money gets reallocated to my account.

masonic wrote: »

There is a strict time limit of 8 working days on sending the funds for a cash ISA to cash ISA transfer and applying those funds to the new account (see this page), and more relaxed limits on transfers to and from other types of ISA. If you are waiting an unreasonable length of time, say, more than 16 working days, you could have grounds for a complaint.

You've got to be kidding me. There is no reason why all paperwork should not be sent electronically right now. I do this all the time. How many times have you sent an attachment in an email. Do you use crytographically secured email - Its easy. Banks must have better secure systems than I have. Definitely electronically is much safer than snail mail.


Transferring from a cash ISA to any other ISA whether this is S&S or another cash ISA is identical. All you are moving is cash. There is no need to sell any shares. On this basis the limit of eight days has already been broken. In excess of 20 years ago I was regularly transferring paperwork electronically across continents. The banks could do it now but it is not financially benficial for them to do so.

It may take some time to get to a stage where the money is taken from your old ISA. But at that stage it should a simple electronic transfer to the new account. It can be done in seconds. Eight days may be legal but I cannot believe you or anybody else would feel that this was reasonable. I don't.

masonic

Matthew2018 wrote: »

Not correct. My money is either still with the old ISA manager or with the new ISA manager. Either way it is not in my account. While it is with the old manager it is earning them interest. If it is with the new ISA manager it is earning them interest. But I cannot use it.

There is no reason for them to speed up the process since money stays in the old manager's pending account until moved to the new manager's pending account. Both managers have access to unallocated money by one degree or another until the money gets reallocated to my account.

So the money is in their "pending account"? Is that an account where the money needs to be available and therefore can't really be used for anything? Unless you are transferring a 6 figure sum, the postage and stationary costs alone are likely to outweigh any money Natwest will make by falling back to the slower paper transfer process.

There are two quite obvious reasons for the process not being any faster. The first is that you are dealing with two companies with two different sets of systems, among a sea of providers all with their own systems. In this case it is IG whose systems are not capable of accepting a fully electronic ISA transfer because Natwest does support electronic transfers would only fall back to the slower process if they had to.

You've got to be kidding me. There is no reason why all paperwork should not be sent electronically right now. I do this all the time. How many times have you sent an attachment in an email. Do you use crytographically secured email - Its easy. Banks must have better secure systems than I have. Definitely electronically is much safer than snail mail.

I'm not kidding you. I linked to the HMRC website, which describes the processes and timescales.

I do have an encrypted email account, but I have nobody to send email to who accepts encrypted email messages, so the situation is rather similar to this one. Financial firms will not send sensitive information by email and other forms of secure communication are not sufficiently widely adopted. Rather like the systems used to electronically transfer ISAs are not widely adopted.

Transferring from a cash ISA to any other ISA whether this is S&S or another cash ISA is identical. All you are moving is cash. There is no need to sell any shares. On this basis the limit of eight days has already been broken. In excess of 20 years ago I was regularly transferring paperwork electronically across continents. The banks could do it now but it is not financially benficial for them to do so.

No it is not. S&S ISA managers do not deal only in cash transfers, in fact in specie transfers of stock and funds are quite common. So their systems have to be different than those of cash ISA managers. There is less incentive to adopt systems that would only be used for a fraction of the transfers they process. Cash ISA to S&S ISA transfers are also relatively rare, and the more common S&S iSA to S&S ISA transfers are less likely to be able to use an electronic transfer system because fewer providers support such a system.

It may take some time to get to a stage where the money is taken from your old ISA. But at that stage it should a simple electronic transfer to the new account. It can be done in seconds. Eight days may be legal but I cannot believe you or anybody else would feel that this was reasonable. I don't.

Then petition IG to invest in their systems (Natwest support electronic transfers). They certainly ought to be able to afford to with all the money they fleece from punters upon which they foist CFDs and forex trading accounts.

Matthew2018

masonic wrote: »

So the money is in their "pending account"? Is that an account where the money needs to be available and therefore can't really be used for anything?

No this is the bank account where millions of pounds of money, that will not be needed until tomorrow, is put on deposit at overnight rates. This is the account where money is held which will not be transferred until the cheque, moving through the postal system and the recipient's system, is finally cleared in several day's time. Banks have departments whose only task is to determine how much money is needed for current expenditure (by the day or possibly by the hour) the remaining money not immediately required is put on deposit. My £2575 plus 1000 other people who are also transfering money at the same time could add up to many millions. If you as a bank could extend this transfer time by just a day, just think of interest you could make by holding the money yourself. Now consider that every day a further 1000 customers want to transfer money. Effectively, you have millions of pounds on deposit for a whole year. By paying by cheque, the banks do not just extend the transfer time by a single day but by several days.

masonic wrote: »

the postage and stationary costs alone are likely to outweigh any money Natwest will make by falling back to the slower paper transfer process.

In my experience paper based systems of any kind are not just expensive, but are very expensive when compared with fully electronic systems. Digital systems can direct processes to the correct person instantly and they don't lose pieces of paper. Cheque handling systems requiring printing and manual processes to secure the cheques and get them signed are even more expensive. If banks are still using these systems then it is because they offer an advantage over digital methods. That advantage is interest.

masonic wrote: »

I'm not kidding you. I linked to the HMRC website, which describes the processes and timescales.

HMRC instruction: Don't do what I do -do what I say. Many years ago, when I used to pay VAT by cheque, the money came out of my bank account on the day that HMRC received the cheque.

masonic

Matthew2018 wrote: »

No this is the bank account where millions of pounds of money, that will not be needed until tomorrow, is put on deposit at overnight rates. This is the account where money is held which will not be transferred until the cheque, moving through the postal system and the recipient's system, is finally cleared in several day's time. Banks have departments whose only task is to determine how much money is needed for current expenditure (by the day or possibly by the hour) the remaining money not immediately required is put on deposit. My £2575 plus 1000 other people who are also transfering money at the same time could add up to many millions. If you as a bank could extend this transfer time by just a day, just think of interest you could make by holding the money yourself. Now consider that every day a further 1000 customers want to transfer money. Effectively, you have millions of pounds on deposit for a whole year. By paying by cheque, the banks do not just extend the transfer time by a single day but by several days.

Overnight LIBOR rates are about 0.66%, and 1 week LIBOR rates are about 0.7%. Your £2575, even if it could be lent with a maturity of a week, which is unlikely, would earn Natwest 32p. Whereas they would need to spend 44p for a second class piece of franked mail (they actually use first class mail, costing them about 60p), plus the cost of an A5 envelope. This is for the initial application to transfer. They would then need to send another piece of mail containing the cheque and ISA paperwork for your account, costing them a great deal more than they would earn in interest through inter-bank lending.

By way of example, lets assume there are 1000 paper transfers to perform per week on ISAs with an average balance of £5000. That's £5,000,000 on deposit for 1 week earning £670 in interest, but the transfer costs total about £3 per customer, so £3,000. The net loss to the bank would be £2,330 per week.

You mention 1000s of customers, but Natwest states that the majority of transfers it sends (these will primarily transfers with other major banks, rather than gambling company with a sideline in stockbroking) are electronic.

But you understand the high costs involved in paper systems because you go on to write....

In my experience paper based systems of any kind are not just expensive, but are very expensive when compared with fully electronic systems. Digital systems can direct processes to the correct person instantly and they don't lose pieces of paper. Cheque handling systems requiring printing and manual processes to secure the cheques and get them signed are even more expensive.

No wonder Natwest has invested in the digital infrastructure to carry out electronic transfers. It's just a shame IG has not.

If banks are still using these systems then it is because they offer an advantage over digital methods. That advantage is interest.

Well consider that myth well and truly debunked, for these reasons:
1. Natwest is the one who is able to earn a few pennies in interest per thousand pounds transferred using the paper system, and this is considerably less than their costs
2. Natwest does support electronic transfers and only falls back to paper when dealing with firms that can't cope with electronic. It is IG who can't do electronic transfers, not Natwest, and IG has nothing to gain from delaying your transfer to them.

Matthew2018

masonic wrote: »

Well consider that myth well and truly debunked, for these reasons:
1. Natwest is the one who is able to earn a few pennies in interest per thousand pounds transferred using the paper system, and this is considerably less than their costs
2. Natwest does support electronic transfers and only falls back to paper when dealing with firms that can't cope with electronic. It is IG who can't do electronic transfers, not Natwest, and IG has nothing to gain from delaying your transfer to them.

You have a unique way of calculating costs. When I am calculating costs I always have to provide the costs for the new system compared with costs for alternatives so that the extent of cost savings can be established. Without fully itemised cost savings no project will get the go ahead, especially in banks, I learned to my cost.



In this particular case you would need control systems for handling the printing and issue of cheques, for getting them signed, noting when the letter including the cheque was posted. You would need further systems for reconciling cheque payments. The cost of these will dwarf the cost of the envelope and stamp. Expensive indeed.


However, these systems are in addition to the sytems they already use for digital payments. Fully digital systems will always beat the costs of systems which include some degree of manual control, such as cheque handling. They will beat them to a large degree.



In my opinionion manually posting a cheque will always be more expensive than other methods. If you think otherwise we must agree to differ.

masonic

Matthew2018 wrote: »

You have a unique way of calculating costs. When I am calculating costs I always have to provide the costs for the new system compared with costs for alternatives so that the extent of cost savings can be established. Without fully itemised cost savings no project will get the go ahead, especially in banks, I learned to my cost.

In this particular case you would need control systems for handling the printing and issue of cheques, for getting them signed, noting when the letter including the cheque was posted. You would need further systems for reconciling cheque payments. The cost of these will dwarf the cost of the envelope and stamp. Expensive indeed.

However, these systems are in addition to the sytems they already use for digital payments. Fully digital systems will always beat the costs of systems which include some degree of manual control, such as cheque handling. They will beat them to a large degree.

In my opinionion manually posting a cheque will always be more expensive than other methods. If you think otherwise we must agree to differ.

I am in complete agreement with you that a paper system and sending a cheque is more expensive than using an electronic system that already exists (in the case of Natwest).

I picked out just a couple of known cost items (postage and stationary) in order to demonstrate even these costs come to more than the interest that could be generated on your capital during the delay a paper system would introduce. I agree with you that the other costs associated with a paper transfer would also be more expensive than electronic, to a large degree. As such, my back of the envelope calculations above should be treated as a significant underestimate of the true net loss Natwest incurs when the receiving provider does not support electronic transfers and Natwest must therefore fall back to paper.

So, in summary the returns Natwest is able to generate on cash held pending a paper transfer are dwarfed by the extra costs associated with the paper transfer, and it does not profit either provider to use the paper system for your transfer - a point that you previously disputed, so I'm glad we are now in agreement.

colsten

Matthew2018 wrote: »

Fully digital systems will always beat the costs of systems which include some degree of manual control, such as cheque handling.

Eh? Unless there's economies of scale, it will be nigh on impossible to justify the cost of fully digital systems over manual handling.

Matthew2018

colsten wrote: »

Eh? Unless there's economies of scale, it will be nigh on impossible to justify the cost of fully digital systems over manual handling.

Well bang goes my vast experience of business systems development and information architecture. You must write a book on your methodology.