Cash ISA transferred to a new provider who put the money in a current account

Cyclone_Charlie

I recently initiated an ISA transfer from my existing account at Chip to an ISA I held at Virgin. The process appeared to go fine, and I received an email from Virgin saying that my funds had been successfully transferred to my ISA account with them.

When I logged into my Virgin account a few days later I was shocked to see the money had not been paid into my ISA account, but instead put in my current account, where it was earning zero interest and had lost its tax wrapper. 

When I called Virgin they said this was because I had already paid money (£10k) into a Virgin fixed rate ISA earlier in the year, and so I could not pay money into a second cash ISA in the same year regardless of it being a transfer and me not having exceeded my annual ISA allowance.

At no stage during the application or transfer process did Virgin inform me that I could not pay money into two Virgin ISAs in the same year. They allowed me to open a second ISA, and even emailed me to confirm that the funds from my Chip ISA had been transferred to this account (it turned out this was not true and they had put the money in a current account). 

I have complained but have got nowhere. In the meantime my money is no longer earning interest, and has lost its tax wrapper. Can anyone advise on the best way to proceed?

xylophone

You had an ISA with Chip.

In which tax year (s) did you subscribe to this ISA?

You opened a Fixed Rate ISA with Virgin in the current tax year and subscribed £10,000?

You opened an easy access ISA with Virgin in the current tax year to accept the transfer of the Chip ISA.

You were advised that the transfer had completed.

Within a few days you found that Virgin had closed the easy access ISA and transferred the money to your current account?

jimjames

It would probably help if you gave exact dates you opened each ISA as that's pretty critical to what is allowed. "This year" could mean 2 different tax years

xylophone

The information requested would be helpful but I would just add that it seems to me that whatever the answers, Virgin had absolutely no right to transfer ISA money to a non ISA account without the express permission of the account holder.

If they could not or would not retain the ISA account, they should have returned the money to Chip on the basis that they had accepted the transfer in error?

Cyclone_Charlie

I put £10,000 in a chip isa in mid-April 2024. I opened an ISA but did not deposit any money with Virgin in August 2024. I then requested that the chip isa was transferred into my Virgin ISA. Two weeks later I received an email from Virgin confirming that the funds from my Chip ISA had been moved to my Virgin ISA. A few days later I logged into my Virgin account to discover the money from my chip account had not been paid into my Virgin ISA but into my Virgin current account instead

masonic

Cyclone_Charlie said:

I put £10,000 in a chip isa in mid-April 2024. I opened an ISA but did not deposit any money with Virgin in August 2024. I then requested that the chip isa was transferred into my Virgin ISA. Two weeks later I received an email from Virgin confirming that the funds from my Chip ISA had been moved to my Virgin ISA. A few days later I logged into my Virgin account to discover the money from my chip account had not been paid into my Virgin ISA but into my Virgin current account instead

You also said:

Cyclone_Charlie said:

When I called Virgin they said this was because I had already paid money (£10k) into a Virgin fixed rate ISA earlier in the year, and so I could not pay money into a second cash ISA in the same year regardless of it being a transfer and me not having exceeded my annual ISA allowance.

So, the sequence of events was?

1. Open an deposit £10k into Chip ISA in April, after the start of the 2024/25 tax year

2. Open and deposit £10k into a Virgin Money fixed ISA "later in the year"

3. Transfer Chip ISA to Virgin

There is nothing in that that would breach the ISA rules. If Virgin has an internal policy not to let customers hold more than one current year ISA with them, then the correct action for them to take would be to refuse the transfer in of the second ISA. As xylophone states, they have no right to pierce the ISA wrapper without your authority, even if they believe the subscriptions to be invalid (which they are not).

On what date did you first complain to Virgin Money? Have they provided you with a final response to your complaint yet? After you receive a final response from VM, or have waited 8 weeks for it, you'll be able to take your complaint to the Financial Ombudsman Service. It would be unwise to do anything with the money sitting in your current account, as that might limit what can be done to fix the problem (most likely solution would be to reverse the transfer and have Chip reinstate the original ISA). Instead, I would suggest you request compensation from VM to the tune of 1.25x (if a basic rate taxpayer) the interest lost until the money can be returned to an ISA (this will probably amount to a few hundred pounds). Plus distress and inconvenience compensation, which would probably come to a low 3 figure sum in this situation.