Paid into wrong YBS savings account?

Cube87

Hi all, my mother was wanting to earn some interest on her savings, she chose to save with Yorkshire Building Society, set up an account online a week ago what she thought was a ‘3 year fixed ISA’ paying 4% interest. 

Today my Mother deposited £20000 in to the account to make the most of this years ISA allowance, however upon reviewing the account she was dismayed to discover she set up a ‘Fixed rate 3 year E-bond’, not the intended ‘3 year fixed rate 4% cash isa’..

We phoned up Yorkshire Building Society today to explain the mistake, they responded because the 20k has been paid into the ‘E bond’ account it isn’t usually possible to take the money out again/transfer over to another account, but said they will contact the relevant department to see if they can do this, in the meantime we were told to set up the ISA account online which we did and they will get back to us..

Now even if transferring out of the account is not possible it isn’t the end of the world since the £800 interest earned over 12 months is under the personal savings allowance of £1000, but reviewing the 3 year e-bond account further they say it pays interest annually (which is good), but then says ‘products that are fixed for over 12 months the interest will be added at the end of the fixed term’, does that mean the interest will be paid at maturity? Meaning instead of the £800 a year being paid (hence tax free for each tax year) it will pay roughly £2400 at the end of the 3 year term, that amount of interest at once being liable for tax that year you receive it?

In that case it’s a real screw up, locking away savings for 3 years to only have to pay tax on the interest at the end of it, hoping they will allow the transfer over to the cash isa! Fingers crossed! 

wmb194

Cube87 said:

Hi all, my mother was wanting to earn some interest on her savings, she chose Yorkshire Building Society, set up an account online a week ago what she thought was a ‘3 year fixed ISA’ paying 4% interest. 

Today my Mother deposited £20000 in the account to make the most of this tax years allowance, however upon reviewing the account she was dismayed to discover she set up a ‘Fixed rate 3 year E-bond’, not the intended ‘3 year fixed rate 4% cash isa’..

We phoned up Yorkshire Building Society today to explain the mistake, they responded because the 20k has been payed into the ‘E bond’ account it isn’t usually possible to take the money out again/transfer over to another account, but said they will contact the relevant department to see if they can do this, in the meantime we were told to set up the ISA account online which we did and they will get back to us..

Now even if transferring out of the account is not possible it isn’t the end of the world since the £800 interest earned over 12 months is under the personal savings allowance of £1000, but reviewing the 3 year e-bond account further they say it pays interest annually (which is good), but then says ‘products that are fixed for over 12 months the interest will be added at the end of the fixed term’, does that mean the interest will be payed at maturity? Meaning instead of the £800 a year being payed (hence tax free for each tax year) it will pay roughly £2400 at the end of the 3 year term, that amount of interest at once being liable for tax that year you receive it?

In that case it’s a real screw up, locking away savings for 3 years to only have to pay tax on the interest at the end of it, hoping they will allow the transfer over to the cash isa! Fingers crossed! 

*paid

What do the terms and conditions say on interest? "It can be paid into the Fixed Rate eBond account, another Yorkshire Building Society account or another building society or bank account."

As you are given the opportunity to have it paid away i.e. it is accessible, it should be declared annually.

https://www.ybs.co.uk/documents/productdata/Factsheet-YB271700W.pdf

Cube87

wmb194 said:

*paid

What do the terms and conditions say on interest? "It can be paid into the Fixed Rate eBond account, another Yorkshire Building Society account or another building society or bank account."

As you are given the opportunity to have it paid away i.e. it is accessible, it should be declared annually.

https://www.ybs.co.uk/documents/productdata/Factsheet-YB271700W.pdf

Thanks for your reply,

Apologies, my mistake for not checking the terms and conditions  beforehand, head was in a bit of a tailspin. 

It did give the option to have the interest paid away to another account, however my Mother chose to have it paid back into E bond account?

 Would only having access to the interest at the end of the 3 year term mean paying tax for the entire 3 year interest that particular tax year?

Band7

It all depends on when YBS report the interest to HMRC.

km1500

If the T and C prohibit taking the the interest out, then yes, all 3 year's interest should be declared at maturity, not each year.

https://community.hmrc.gov.uk/customerforums/pt/097f17c5-77af-ed11-9ac4-00155d975688

If you can't change the account to an ISA maybe they would change it to a monthly interest bond.

tony_1

14 Day right to cancel - could not see any mention of one

Not sure if there is one.

wmb194

Cube87 said:

wmb194 said:

*paid

What do the terms and conditions say on interest? "It can be paid into the Fixed Rate eBond account, another Yorkshire Building Society account or another building society or bank account."

As you are given the opportunity to have it paid away i.e. it is accessible, it should be declared annually.

https://www.ybs.co.uk/documents/productdata/Factsheet-YB271700W.pdf

Thanks for your reply,

Apologies, my mistake for not checking the terms and conditions  beforehand, head was in a bit of a tailspin. 

It did give the option to have the interest paid away to another account, however my Mother chose to have it paid back into E bond account?

 Would only having access to the interest at the end of the 3 year term mean paying tax for the entire 3 year interest that particular tax year?

No, you still had access to it, just that you decided to reinvest it. The technicalities will be moot anyway as YBS will likely declare it annually to HMRC and that's what it will expect to be declared as it doesn't know the terms of your account.

wmb194

tony_1 said:

14 Day right to cancel - could not see any mention of one

Not sure if there is one.

What do the terms and conditions say? "To provide the fixed interest rate, the Society enters into a fixed-cost transaction in the external money markets. We are committed to this transaction for the full duration of the eBond. This means that once your eBond account has been opened, there are no cancellation rights."

It's common for fixed rate savings bonds to have no cancellation rights.

Cube87

Thanks for all your replies. 

Just a quick update; YBS got back to us and fortunately they are allowing the funds to be transferred over to the ISA account and will close the bond account.

badger09

That’s a good result from YBS as they were under no obligation to do that. 

d63

there are various consumer protection rights relating to online purchases, such as returning stuff within 14 days etc, are there any such rights applicable in this instance if ybs had not been so obliging?