Scottish Widows S&S ISA - Problems ..

milton1970

Looking for a little help / guidance or clarity if anyone else has had similar issues.
In process of tidying up parents investments & the each have a S&S ISA holding investments in a couple of (relatively old) Scottish Widows Strategic Income / Growth funds.
As we look to tidy up & look at better investment options the plan was to divest from the existing investment holdings asap (the SW investment funds), hold the cash funds in the SW S&S isa temporarily & arrange an isa transfer out to another existing S&S isa on an alternative platform (with better choice).
Reasonable approach you would think ... only real risk is being out of the market.
Unreasonable approach according to Scottish Widows ! - their process does NOT allow or support this approach & to quote "we do not allow cash to be held in S&S isas".
Scottish Widows process dictates that the only way to action this is to submit a transfer form through the new platform provider & that request will result in a sale of investments & transfer of isa cash. Expectation is that this would take 45 days !
Alternative is that you can divest funds & have cash withdrawn - outside the isa wrapper.
This feels unfair - SW appear to be dictating when an investor can exit fund plus restricting customer options & behaviour. 
Any view on whether this approach is legitimate ?
TIA
M

george4064

Ofcourse it's legitimate, its their platform so they can set whatever their own rules they like (within reason) and I would say that this restriction is reasonable. I know from experience that old platforms cannot handle clients simply holding cash on the platform, nearest thing clients can do is hold a cash fund.

In your situation, I would just go down the route of processing an ISA transfer (so maintaining ISA status) which as part of the process the existing investments will be sold, cash transferred to new provider and then invested in the selected funds on the new platform.

dunstonh

Unreasonable approach according to Scottish Widows ! - their process does NOT allow or support this approach & to quote "we do not allow cash to be held in S&S isas".

That is normal with most fund houses. 

Scottish Widows process dictates that the only way to action this is to submit a transfer form through the new platform provider & that request will result in a sale of investments & transfer of isa cash. Expectation is that this would take 45 days !

In reality it is normally closer to 7-10 days but everyone is adding on time because of COVID.

This feels unfair - SW appear to be dictating when an investor can exit fund plus restricting customer options & behaviour. 

If you bought a black and white TV would you consider it unfair that it cannot do ultra HD Widescreen?

SW are not dictating anything.  They are stating what their options are.  No more, no less.   Until recent times, cash accounts were only seen on the more advanced investment platforms.  No fund house offered a cash facility.  That is changing but it was not a facility offered when you bought it and its not a facility now.  So, they are not restricting options or behaving incorrectly.

Any view on whether this approach is legitimate ?

Of course it is.  

bowlhead99

milton1970 said:

This feels unfair - SW appear to be dictating when an investor can exit fund plus restricting customer options & behaviour. 
Any view on whether this approach is legitimate ?

The provider of the ISA product you bought is 'restricting customer options' to the options that they have decided to offer with the product that you wanted to buy.  I am not going to complain that I can't buy building products from my local off licence, even though my corner shop sells both booze and cleaning products and B&Q sells both cleaning products and building products. All the shops offer what they want to offer.

In the old days when ISAs were first offered as successors from PEPs and TESSAs, HMRC had set limits for how much you could put into a cash product vs an investment product vs an insurance product. When you bought the SW product you bought it to hold investments, not to hold piles of cash pending transfer to some other rival product. So, just because you would like to do that now, that's not their fault - it's your fault as the customer for having, over time, changed your own tastes and preferences on what you would like to hold in the account. They don't have to redesign their systems and software to allow you to hold a pile of cash.  They are quite happy to encash the product and give you your money, or redeem your investment units as part of transferring the resulting cash to some other ISA manager, so they are not 'dictating when you can exit the fund'.

If you want to transfer to another ISA manager ASAP, put in your transfer request with the new ISA manager ASAP.  If you want to hold cash or cash equivalents because you don't want to hold investments any more (which seems a strange choice given that you are planning to move to a new platform, to buy investments) then you could perhaps put it in a money market fund. 

But the bottom line is, it seems quite legit.

The expectation that it may take 45 days to sort a transfer is obviously erring on the side of caution because they don't know who the transferee is going to be or how quick the request from the transferee will be to reach them with all required information. When I last transferred some money out of SW (which involved encashing units in their funds inside a workplace pension and sending the resulting cash to my SIPP provider) it was done within a week or two. Even if they write a cheque and send it by mail and there's a bank holiday in the way, it is probably not going to take six weeks for a cash transfer of your redemption proceeds.

Albermarle

I have a old Legal and General ISA and you can not hold cash in it either . 
Same for some personal/ex employer pensions.
As said being able to move in and out of a cash fund within an ISA/pension is a relatively recent development  for most retail customers .

milton1970

Thanks for the context all - transfer formS have been sent ... taking this experience of SW as a warning.

Not sure I get your different shops comparison @bowlhead99 ... I was purely stating that SW refuse to hold uninvested cash in S&S isa .. and I thought that unreasonable. It seems that some of the less dynamic platforms operate in this unhelpful way 

Lets hope its 10 days rather than 45 

bowlhead99

milton1970 said:

Thanks for the context all - transfer formS have been sent ... taking this experience of SW as a warning.

Not sure I get your different shops comparison @bowlhead99 ... I was purely stating that SW refuse to hold uninvested cash in S&S isa .. and I thought that unreasonable. It seems that some of the less dynamic platforms operate in this unhelpful way 

The analogy is that Argos refuse to sell me a Rolex or Grand Seiko because they don't want to jump through the hoops to become part of the authorised dealer network as it doesn't suit their 'sell it from a catalogue' model, and the vast majority of their stores won't resize a watch bracelet while you wait, so I may be better off doing my watch purchasing from a different place, or at simply recognising that my options with them are limited and that some of these 'less dynamic' watch distribution outlets will be less helpful than a proper jeweller, even though they were fine for buying a Timex as a child in the 80s. 

The point / comparison is simply that it's not really 'unreasonable' for a provider of goods and services to only offer the particular services that they want to offer, supported by the systems and processes that they have in place. So your notion that their answers to you are not 'legitimate' is wide of the mark.

Sebo027

It is quite common for Fund Managers or Investment Platforms to require an investor to have a General Investment Account if he or she is invested under a Stocks and Shares ISA. Income from the investment is often paid into the General Investment Account. My point is they don't hold the cash "in the ISA."

They are also not restricting you from exiting the fund. They are not restricting your options either, you cannot make them hold your money as cash under a cash ISA if they do not offer cash ISAs as a "product" much like you cannot demand that Curry's sell you a laptop they do not stock.

I could be missing something but it seems like the outcome of both options is the same:

• You will divest from the Scottish Widows Strategic Income / Growth funds;
• You will have the investment sold and cash made available;
• You will have the cash transferred to a new platform with great selection of investments;
• You will be able reinvest the cash in other funds;
• You will maintain the tax-free status of the ISA.

Are you just mad that it's going to take 45 days? 

milton1970

This is all getting very confusing.. now we are looking at Argos & watches!

My point was this ..
SW do not allow investments held within a S&S isa to be divested & the cash outcome from the divestment to be held in a S&S isa (not asking for a Cash isa here!). They insist that any divestment is either reinvested at the same time or withdrawn (out of isa wrapper).
Transfers out are processed via an isa transfer request - you cannot divest, hold cash in S&S isa then arrange a transfer out.

in my view .. this is unreasonable & creates inertia ... customers stay rather than transfer out but from comments above it does seem SW are not alone in this.

The end 😁

milton1970

@Sebo027 not “mad” at 45 days .. just feel that SW are being unreasonable in not operating a platform that allows customers to trade as they wish ... 

dunstonh

SW do not allow investments held within a S&S isa to be divested & the cash outcome from the divestment to be held in a S&S isa (not asking for a Cash isa here!). They insist that any divestment is either reinvested at the same time or withdrawn (out of isa wrapper).

That is because SW is not an investment platform.  They are  fund house.    Fund houses didn't offer cash facility until recently (as mentioned earlier).

in my view .. this is unreasonable & creates inertia ... customers stay rather than transfer out but from comments above it does seem SW are not alone in this.

Its a black and white tv (from argos!) in a ultraHD world.       An Iphone 1,  An Austin allegro....