Provider charging a fee to withdraw money from ISA NOT in terms and conditions when I opened the acc

Dinah93

I opened an ISA with Shepherd's Friendly a few months ago, as Quidco were offering £225 cashback when you made 3 payments into it and it was a fee free withdrawal with no notice. I've now emailed to close the account and withdraw the 3 payments, and they've replied to say there is a 10% charge to do this. Is it legal for them to have added on this charge without my agreement or even knowledge? I'd have stopped making the payments if I'd had any idea it would cost me 10% of my balance to close the account, it's wildly unlikely I'd make that in interest. 

"We understand that the spread of novel coronavirus (COVID-19) has caused widespread uncertainty, and we’re in no doubt that, recently, you will have been thinking about your personal finances more than usual. As a mutual, we’re here to help; so, we’ve put together a useful article that provides details of how we’re managing investments throughout this period. You can read this by clicking here.

 

Due to the volatility and continuing uncertainty in the financial markets caused by COVID-19, we are currently taking action to protect all of our members. We are therefore applying a Market Value Reduction (MVR) to all part-withdrawals, closures and transfers from our ISA until further notice. This is not a decision that has been taken lightly but, given the unprecedented situation we all find ourselves in, this is necessary to ensure fairness for all of our members. You can find our more about MVRs by clicking here.

 

An MVR aims to ensure that plan holders who have money in our fund are not disadvantaged, therefore allowing all members to receive a fair share of the fund. We’ll always let you know if we are applying an MVR when you ask to withdraw from or close your account and, any money that remains invested in your plan will not be subject to an MVR. The link above explains more about MVRs and why we apply them in certain situations, and you can also find information in your plan’s terms and conditions. Please note, the MVR value is subject to change in the future.

 

Investing should be viewed as a medium to long-term commitment, as this helps your fund to recover from any periods where market conditions are less favourable. As your money is invested in our With-Profits Fund, the value of your investment won’t change daily during periods of market volatility, and this helps to protect the money you have invested with us.

 

Your withdrawal quote:

 

Current balance	£602.48
Market value reduction	£60.25
Balance you’ll receive after MVR has been applied	£542.23 "

dunstonh

Is it legal for them to have added on this charge without my agreement or even knowledge?

Yes.   And it was with your agreement and knowledge.  MVRs are in terms and conditions.   

Basically, the value of the underlying investment fund is worth less than the current value of your investments.   If you sell the investments whilst they are in a loss position then the MVR is the effective loss applied to you (simplified that explanation rather than give the full technical reason).

 I'd have stopped making the payments if I'd had any idea it would cost me 10% of my balance to close the account, it's wildly unlikely I'd make that in interest. 

You should never open up an investment that is designed to be held for 5-15 years when you want to draw it out after 3 months.

eskbanker

Dinah93 said:
Provider charging a fee to withdraw money from ISA....

Just to be clear, they're not charging a fee to withdraw as such, they're applying a market value reduction to the investment itself.

SoftCentaur

I assume Quidco's £225 cashback eases the pain.

grumiofoundation

https://www.shepherdsfriendly.co.uk/news/coronavirus-covid-19-managing-members-investments/

https://forums.moneysavingexpert.com/discussion/6126934/shepherds-friendly-mvr-warning/p1

As above MVR will have been in Ts and Cs - in any case MVR was in place before you invested! 

As with post above you have £225 cashback, so even if you pay £60 MVR still £165 up - what more do you want? 

On that note however has the cashback actually been paid? 

Ts and Cs on Quidco state:

- Cashback will not be paid if the policy is cancelled

- Cashback will not be paid if you stop paying or reduce your premiums

So if you have done either of these before it is paid this may mean you don’t get cashback? We signed up for this cash back deal a few (tax) years ago and I seem to remember we ended up paying 10 or 11 premiums before the cashback was paid. 

Dinah93

The £225 cashback would ease the pain.... If they hadn't refused it! 

If it's legal then all's well and good and I won't kick up a fuss, it just isn't something I've ever come across before and it's not something I've had before when moving money between accounts. 

dunstonh

f it's legal then all's well and good and I won't kick up a fuss, it just isn't something I've ever come across before and it's not something I've had before when moving money between accounts. 

It is not an account.  It is an investment product.    With all investment products, you get the warning that your investments will go down as well as up.    Investments zig zag up and down on a daily basis and if you take the money out when its gone down you get less.   If you take it out when it goes up, you get more.   Over time, the zig zagging heads in an upward direction.  3 months is a blink of an eye for investing.

Thrugelmir

Dinah93 said:

I opened an ISA with Shepherd's Friendly a few months ago, 

 

An ISA is simply a tax wrapper that can hold a variety of investments and/or cash savings. Did you actually read the product literature that was sent. Or were your blinkered in your haste to pocket a quick £225.  

grumiofoundation

Dinah93 said:

The £225 cashback would ease the pain.... If they hadn't refused it! 

If it's legal then all's well and good and I won't kick up a fuss, it just isn't something I've ever come across before and it's not something I've had before when moving money between accounts. 

Presumably was refused since you didn't follow the Ts and Cs set out for cashback. 

The product offered by Shepherds friendly is not a savings account but an investment product (the clue is in the name - Stocks and Shares ISA) so you can't expect the same 'accessibility' as from a savings product

Unless you absolutely need access to the money now (in which case you shouldn't be investing it!!) why not just leave it and wait for MVR to be removed? 

 

vanbastens

But why is the MVR applying if they paid annual bonusand for my understanding that supposed to mean that value of investment has grown up ?

Alexland

The annual bonus is artificial to make people think they are making progress towards their long term goals smoothing out the perceived return over the long term.
The underlying fund is probably still down since the covid crash (eg the FTSE100 has not recovered yet) and even though the OP invested after that crash they are still suffering the same standard MVR as everyone else.
Its not really fair but that's what the OP signed up to - allowing the provider to apply opaque MVRs to all investors and looking at the product webpage using the Internet Archive Wayback Machine the warnings were there.