HMRC rules allowing banks to take up to 15 days to transfer money from an ISA

denbro

Castle Trust Bank have told me that HMRC allow them to take 15 working days to transfer a maturing ISA to a new provider and that the maturing ISA will sit in a holding account at 0.01%.
Does this allow banks to drag their feet and make money from any maturing ISA?  They must be making staggering sums of money from this ruling!  What can be done?

TheSpectator

Not HMRC rules as such but Government rules; https://www.gov.uk/guidance/transfer-an-isa-if-youre-an-isa-manager#cash-isa-transfers

Each stage of the process has it's own timescales making up the 15 days.

What can be done? Very little, but set up your transfer in advance for the maturity date if possible.

eskbanker

The timescales are specified within the ISA legislation itself:

https://www.legislation.gov.uk/uksi/1998/1870/regulation/21A

What can be done? You'd need to lobby your MP to try to get the law changed....

Albermarle

The transfers are usually a bit quicker than that and with a fixed rate maturing, you can usually start to organise the transfer about three weeks before the maturity date.

Rich2808

My new provider applies their new rate from the date they receive the ISA transfer application not when they get the money. So perhaps your new provider may well do the same.

Unfortunately it depends on the efficiency of the current provider - so they may be waiting some time to get the funds they are paying interest on!

masonic

denbro said:

They must be making staggering sums of money from this ruling!

What makes you suppose that? During those (up to) 15 working days, interest will normally be payable by one or the other provider. According to data from UK Finance, 87% of cash ISA transfers are completed within 7 working days. The slower transfers will be those involving sending a cheque in the post. Most cash ISAs contain less than £10,000, so even if interest wasn't paid by either provider for a day or two during the transfer, the potential gain would be perhaps £3 per transfer on average, while the cost of printing a cheque and the transfer history paperwork, then sending that in the post would likely be about the same if not more.

TheBanker

denbro said:

Castle Trust Bank have told me that HMRC allow them to take 15 working days to transfer a maturing ISA to a new provider and that the maturing ISA will sit in a holding account at 0.01%.
Does this allow banks to drag their feet and make money from any maturing ISA?  They must be making staggering sums of money from this ruling!  What can be done?

The transfer is indeed allowed to take up to 15 days. However, if you use providers that are both part of the electronic transfer system, you'll usually see the transfers processed much quicker - my last one only took a couple of days. The 15 day timeframe is to accomodate ISA transfers being managed by posting forms and cheques between providers which is how all ISA transfers used to be done, before the electronic scheme was set up.

As someone else said, you can also minimise the transfer time by giving your instruction in advance of the existing ISA maturing. That should save a couple of days if they are using the paper method.

You could also only select ISAs from providers who move maturing funds to an account paying a reasonable rate. I don't think Castle Trust offer easy access ISAs as part of their product suite, but most providers who do will apply their easy access rate, which tends not to be great but is usually better than 0.01%.

jimexbox

I recently transferred a fixed Lloyds ISA to Santander. Give instructions 3 weeks before maturity to Santander, didn't need to contact Lloyds. Funds disappeared from Lloyds on maturity day and appeared in Santander the following day. Couldn't of been easier.

TheBanker

I started an ISA transfer on Sunday, from Zopa to Trading212. Completed this afternoon. 

TheBanker

This is interesting:

A voluntary agreement between The Building Societies Association (BSA), The Investing and Saving Alliance (TISA) and UK Finance, sets a target of a minimum of 85 per cent of cash ISA transfers to be completed within seven working days for 2024.

Collectively, the industry can report that 87 per cent of cash ISA transfers were completed within this timeframe between 1 January 2024 and 30 September 2024.

https://www.bsa.org.uk/media-centre/press-releases/cash-isa-transfer-performance-15e4dd1c743b8b8fd7f3a08ce9f10c49