ISA Providers; Are most choosing to ignore the Chancellor's new ISA Reforms?

VTechnician

UPDATE 02 Aug 2024 - PLEASE NOTE THAT SINCE THE START OF THIS THREAD THE REGULATIONS,  GOVERNMENT RELEASED NOTICES AND FINANCIAL INFORMATION REGARDNG ISAS HAS CHANGED.
PLEASE ALWAYS REFER TO THE LATEST INFORMATION REGARDING ISA REFORMS, RULES AND REGULATIONS AT '.GOV.UK'
                                                                                  https://www.gov.uk/individual-savings-accounts

 I contacted the provider of my Innovative Finance (flexible) ISA because I was having difficulties finding any providers of an easy access ISA that would allow me to make partial transfers-out to Proplend in accordance with the 10 Nov 2023 ISA reform Newsletter issued by the UK Chancellor in readiness for the New Tax Year, 06 Apr 2024.

One of Proplend's staff quickly responded to say that Proplend had done their own research to discover how many other providers had pledged to adopt the Chancellors New ISA Reforms (in particular the ability to make partial transfers-out of current year subscriptions to a new provider).

Proplend were extremely kind enough to send me a spreadsheet of their own results.

In summary:

Their research covered a total of 87 ISA Providers.

They found that just 16 (18%) of those providers had pledged to adopt the reforms. The remainder have declined or failed to respond.

I web-searched all 16 of those ISA providers and found that at least 8 (50%) of those were in fact Wealth Management Institutions, either employing the services of an external provider and offering no easy access ISA or declining to provide any interest rate details.

Of the remaining 8, interest rates for their easy access ISA(s) ranged between a mediocre 3.4% AER to a derisory 1.4% AER.  At those rates I might as well take my chances by holding the funds as Premium Bonds. At least they are tax-free and I can retrieve them within 5 days.
                             I must add here that would otherwise end up paying tax on my non-ISA savings.

So it seems that Most ISA Providers are currently paying lip-service to the New ISA Reforms despite the Chancellor declaring: "The government announced a package of ISA reforms and will make these changes to ISAs from 6 April 2024"

There is good reason to use such an ISA, e.g. to maximise ISA savings and interest in cases  where the holding accounts for P2P lending bear zero interest rates for funds awaiting a match with a loan. This is especially necessary when you currently hold all of your current tax year's subscriptions in an ISA already, as withdrawing (i.e. removing from its ISA 'wrapper') to fund any other ISA would put you on the wrong side of the £20,000 ISA subs rules.

So readers....Keep this thread informed if anyone spots a truly useful Easy Access ISA with a competitively high interest rate, and WILL allow partial transfers out of CY subs.

Hoenir

There's no  regulatory requirement to provide a particular saving product.  Ultimately it's a commercial decision for each financial institution.  As for P2P that's a very limited market these days. After many people ended up getting their fingers burnt. 

eskbanker

VTechnician said:

So it seems that Most ISA Providers are currently paying lip-service to the New ISA Reforms despite the Chancellor declaring: "The government announced a package of ISA reforms and will make these changes to ISAs from 6 April 2024"

The changes announced in the budget were a package of measures which adjusted the legislative scheme rules, but few are mandatory, so there's no obligation on providers to support all of them, other than compliance with fixed rules, e.g. not offering adult ISAs to 16/17 year olds.

https://www.gov.uk/government/publications/tax-free-savings-newsletter-11/tax-free-savings-newsletter-11#individual-savings-account-isa-reform-2024 summarises which of the changes are and aren't mandatory, including:

1.5 Allow partial transfers of current year ISA subscriptions between ISA managers 

This change is not mandatory, and you do not have to offer or accept a transfer in (partial or full). If ISA managers choose to offer partial transfers of current year subscriptions, this should be set out in the terms and conditions of the account.

[...]

masonic

Partial transfers of any kind have never been mandatory a number of providers require ISAs to be transferred in full.

Current year flexible ISAs can be partially self-transferred, and for cash on the account this is the most efficient way to do so.

p00hsticks

VTechnician said:

So it seems that Most ISA Providers are currently paying lip-service to the New ISA Reforms despite the Chancellor declaring: "The government announced a package of ISA reforms and will make these changes to ISAs from 6 April 2024"

In my experience these government announcements are often made without little or no prior consultation with the bodies actually affected by or  expected to implement the changes.  

I've no idea what sort of a 'heads up' if any, financial institutions were given of these proposed ISA reforms prior to their announcement in the Autumn Budget, but four months notice (covering both Christmas and Easter breaks) is not a great deal of time to determine what changes are required to action them and then to put the necessary alterations into place.

I can fully understand if efforts have been concentrated on ensuring that the mandatory changes - such as the increase in age limit - are actioned before considering later whether adopting any of the optional reforms would be a commercially sensible strategy.  

VTechnician

OK! ...I can see that most of the comments refer to information that I had already researched. Hence why I used the term reforms and not rules or regulations.
I understand that the reforms are not mandatory and maybe if I had included this, it would have reduced the repeats.

I did wonder though, just how much consultation took place before publishing the reforms. So hopefully p00hsticks' experience might be verified by someone else from within the ISA industry.

Thankfully my experience with P2P lending has been / still is positive, despite awareness of its level of risk. I acknowledge that private P2P lenders were effectively eschewed in favour of funding from financial institutions around 2019-20. I remained aware and didnt lose out. Specifically,  Proplend, the institution I migrated to has been diligent, fair and reasonable, with very quick responses to any queries I have made. This isn't an endorsement; simply objective reporting. 

To stay positive though and to continue to find helpful solutions... please do keep a lookout for an easy access ISA with a competitive rate which does fully adopt the ISA reforms and let us know here!

I welcome constructive, objective and verifiable comments.

jimjames

VTechnician said:

To stay positive though and to continue to find helpful solutions... please do keep a lookout for an easy access ISA with a competitive rate which does fully adopt the ISA reforms and let us know here!

I welcome constructive, objective and verifiable comments.

As above why do you need an ISA that allows partial current year transfers? You can do the same thing by using one of he many flexible cash ISAs and removing the portion of cash to pay into your IF ISA. That is allowed by the regulations. I used Chip for that purpose.

VTechnician

jimjames said:

VTechnician said:

To stay positive though and to continue to find helpful solutions... please do keep a lookout for an easy access ISA with a competitive rate which does fully adopt the ISA reforms and let us know here!

I welcome constructive, objective and verifiable comments.

As above why do you need an ISA that allows partial current year transfers? You can do the same thing by using one of he many flexible cash ISAs and removing the portion of cash to pay into your IF ISA. That is allowed by the regulations. I used Chip for that purpose.

Now that is some good news that I wasn't aware of. Indeed when I put my plight to Proplend's staff, they never did mention this.
I opened a Chip account and stopped short of loading its flexible ISA as I thought that It would be considered oversubscribing by not using the ISA transfer route.
I shall get straight onto Chip's staff who have seemed helpful enough thus far. Thank you.
May I ask how did you link between Chip and your IFISA ?
I believe that Chip uses open banking to link accounts and I'm not sure whether Proplend entertains open banking at the mo.

VTechnician

@jimjames
Here's what Alok from Chip said quoted below.   (..he referred to deposits from Proplend rather than to proplend in the 1st para), but I was interested in the potential for linkage either way in any case).
So if you have a method that I've been too dumb to figure out please do share it.

"Hi, Many thanks for your query. Your Chip Cash ISA must be funded by a bank account that is linked to your Chip account by Open Banking. We support the following banks: Bank of Scotland, Barclays, Danske, First Direct, HSBC, Halifax, Lloyds Bank, Monzo, Nationwide, Natwest, RBS, Santander, Starling, TSB, Ulster Bank. Unfortunately this means that you can not make deposits from your Proplend account. The Chip Cash ISA does have an account number and sort code but any deposits that are not funded from your linked bank account would be automatically returned. Regarding transfers out to another ISA, we do not currently support partial transfers meaning that you can only transfer out your full balance. Please let me know if you have any further questions.

Alok Chip"

jimjames

Unfortunately if you ask the wrong question they're liable to give the wrong answer albeit correct for the question asked. You aren't transferring from Chip to anywhere else, you're withdrawing the money but because it's a flexible ISA you don't lose that part of your allowance and can pay it in elsewhere. That's not what you asked Chip so the answer they gave was correct in relation to transfers.

You don't link Chip to another ISA, you link to your current account and can use the money from there to pay into another ISA.

masonic

VTechnician said:

I understand that the reforms are not mandatory and maybe if I had included this, it would have reduced the repeats.

Some of the reforms are not mandatory. Some are.

VTechnician said:

@jimjames
Here's what Alok from Chip said quoted below.   (..he referred to deposits from Proplend rather than to proplend in the 1st para), but I was interested in the potential for linkage either way in any case).
So if you have a method that I've been too dumb to figure out please do share it.

"Hi, Many thanks for your query. Your Chip Cash ISA must be funded by a bank account that is linked to your Chip account by Open Banking. We support the following banks: Bank of Scotland, Barclays, Danske, First Direct, HSBC, Halifax, Lloyds Bank, Monzo, Nationwide, Natwest, RBS, Santander, Starling, TSB, Ulster Bank. Unfortunately this means that you can not make deposits from your Proplend account. The Chip Cash ISA does have an account number and sort code but any deposits that are not funded from your linked bank account would be automatically returned. Regarding transfers out to another ISA, we do not currently support partial transfers meaning that you can only transfer out your full balance. Please let me know if you have any further questions.

Alok Chip"

That's a perfectly reasonable response to an irrelevant question. You do not want to do any sort of ISA transfer. You want to flexibly withdraw current year money from one ISA (Chip) then subscribe it to another (Proplend) via your linked account. This has been permitted since the introduction of ISA flexibility and is not optional for ISAs that are flexible (see bottom sentence below):

https://www.gov.uk/guidance/manage-isa-subscriptions-for-your-investors#flexible-isas

Therefore you might want to rephrase your question to Chip to "Is the Chip ISA flexible?" and you should get a more useful response.