Yorkshire Building Society - Beware - Maturity Default Options On Maturing Fixed Cash ISA's

HUMBUG

For any customers of YBS whose fixed rate cash ISA's are maturing, please don't assume that the YBS will default your savings into a similar account at the current higher rate being offered.

For example:
My 91 year old blind father received the options for his maturing fixed 1yr cash ISA .

One of the options was if he did nothing , it would be transferred to the 1 year fixed cash ISA at 1%.

I checked their website and they were offering 1 year fixed cash ISA at 1.3% so our family naturally assumed it had increased because of the hike by BOE . That the letter had been sent out before the BOE increase in interest rates and that on maturity my father's savings would default to the 1 yr fixed at 1.3%.

I decided to check  (via online and contacting their helpdesk as a double-check)  and apparently that is not the case.  They have informed me that on maturity of my fathers cash ISA on the 31st May 22 , it will default automatically to a fixed 1 year at 1% unless you complete and send them a form   YBS1057.

Unfortunately, their maturity instruction forms do not offer a blank section to request they transfer the matured savings into another similar YBS product that offers a higher rate (which would simplify the process rather contacting them and discovering there are other forms to complete).

Coventry Building Society are doing something similar too . They offer a default on maturing cash ISAs to something similar but no blank section to request transfer into a different product . For example , if you currently have a 2 yr fixed ISA  they will only offer default into 28 month, 3y , 5yr etc but not the 1year . 

The 2 yr rate is 1.75% while the 1yr is 1.5% so one would have to contact them specifically to have it transferred to the 1yr  or again , complete blessed forms.

Anyhow, don't assume the building societies and banks will default your matured savings into the similar product that has the higher rate on their website.

refluxer

That's annoying. All the fixed rate ISA I've opened in the past (from the likes of Nationwide, Principality, Paragon, Sainsburys etc) have all defaulted to a variable rate, easy access 'maturity' ISA so I must admit I'd presumed this was the norm. Either way, defaulting to an easy access ISA is much better for the customer IMO, as you obviously don't get locked into a potentially-unwanted fixed rate account if you forget to submit your maturity instructions in time.

HUMBUG

refluxer said:

That's annoying. All the fixed rate ISA I've opened in the past (from the likes of Nationwide, Principality, Paragon, Sainsburys etc) have all defaulted to a variable rate, easy access 'maturity' ISA so I must admit I'd presumed this was the norm. Either way, defaulting to an easy access ISA is much better for the customer IMO, as you obviously don't get locked into a potentially-unwanted fixed rate account if you forget to submit your maturity instructions in time.

I also expected a default into an easy access ISA , but it doesn't offer that on the YBS form. It would have made it easier for my father to then have some time to decide what he wanted to do. It does say you will have full access to your money from 1st June 22 - 30th June 22 .  But my father wouldn't have bothered checking all this out because he would have thought his savings was earning 1.3%. 

Even I and my sister thought it would be moved to the similar product at 1.3%,  but luckily I decided to double-check (took a few hours of my time though).

Malchester

Not surprising from YBS really. They are an awful institution. Recently put on website that the majority of variable rate accounts were increasing by at least 0.25%. Maybe true but none of the currently available accounts increased at all, it was just some accounts no longer available. When I spoke to them they said they could not put on their website a list of accounts that were increasing - but Coventry BS did just that. Avoid YBS altogether.

Albermarle

My experience with other savings institutions is ;
1) There has always been an option to mature into an easy access account ( although the last one did not make this option easy to find)
2) If it defaults into a new fixed rate isa , you get the latest savings rates
3) Some default into the same product you had before and some into easy access.

YBS 'system' looks poor .

HUMBUG

This is their response, and I can now understand their reasoning, but I think providing a default option to an easy access cash ISA is better than offering a product which has an obviously lower rate than what is currently on offer. I am now asking whether they apply any penalties for trying to transfer during the extra 1 month cooling off period after maturity date (should never assume they don't).

"I can, however, confirm any fixed product ISA or Bond will confirm on the opening factsheet the process at maturity. Each customer signs to confirm they have read the factsheet and they agree to the terms of the account product they’re opening.

Fixed Rate products are regularly being released and have a limited subscription allowance and therefore these products can be withdrawn from public sale at any time.  At maturity, we have to look to all customer needs and therefore the product we select will be available to all maturing customers. The product we choose will have a month for withdrawals / closure without a loss of interest, the public on sale products don’t have this facility. It would be unfair to force customers into a product where they would be unable to have any access to their funds at maturity.

The maturity reminder letter we send out to non-online registered customers offers all the available options – we don’t include a product transfer document as the customer will need to have read the factsheet for the new product. Therefore, if the customer isn’t online registered, they will need to request the information from our high street presence or Telephony team. The product transfer sheet will then be sent with all the regulation documents required."

Descrabled

Me thinks they protest too much!

HUMBUG

I asked them about any penalties for transferring within the 1-month period after maturity date and they replied back:

"This is the wording on our Fixed Rate ISA factsheet:

Maturity: This Fixed Rate ISA will mature into another Fixed Rate ISA that will be of no greater term than this Fixed Rate ISA. At maturity and during the first month after maturity, you will be able to withdraw all or part of your savings and have full access to them without incurring any loss of interest. Thereafter, you will only be permitted to close your ISA but this will be subject to a number of days loss of interest on the closing balance. The number of days’ loss of interest will be no more than the number of days under the terms of this Fixed Rate ISA. Further partial withdrawals will not be permitted. Early closure will result in the loss of your tax free status, other than transfers to another ISA. We will send to you by post full details of the new fixed rate ISA at least 14 days prior to the maturity of this Fixed Rate ISA.

 

I’m unable to confirm any specific account details but as you can see from the above wording “At maturity and during the first month after maturity, you will be able to withdraw all or part of your savings and have full access to them without incurring any loss of interest.”  Therefore as an example, if the maturity date was 31/04/2022 - funds would be able to be withdrawn without a loss of interest/penalty from 01/05/22 to 31/05/2022. However, from 01/06/22 only closure would be permitted and there would be a loss of interest, the amount would depend on the terms of the new product."

So, it does look like there is no penalty (within that 1 month after maturity date)  for transferring to another product (with higher interest rates) or another provider. 

Considering how interest rates are going, maybe it would be better to just wait after the maturity date 31st May 22 of my fathers cash ISA . If BOE increase interest rates like I expect them to do , then YBS and other providers might just up some of their 1 year fixed cash ISA interest rates again before the end of that extra 1 month cooling off period.