Beware 15 working day transfer with no interest

bobfromcov

Hello. A problem has surfaced which to my knowledge is not addressed by mse. Whenever you decide to change institution for a better ISA interest rate, the transfer of funds takes up to 15 working days during which no interest is paid either by the last bank and the new one. This dead time amounts to loss of over 0.5%. I'm not sure if this can be speeded up but it makes most transfers to a new account a waste of time. Is this just T212 and MoneyBox of is the "dead time universal?

surreysaver

In the past when I've done a transfer, it has occurred on the same day or next working day. Taking the statutory maximum of 15 days is unusual - it must only be the organisations which the rate-tarts go after 

Ayr_Rage

Most transfers are much quicker.

How do you get a loss of 0.5%?

Johnjdc

A loss of 0.5% in 15 days? Can you tell me where this ISA paying 12.9% AER is? 😊 

refluxer

ISA guidelines state that interest earned during the transfer period should be paid by the receiving provider to ensure no loss of interest occurs which means they should back-date it to the time it leaves the sending account, rather than simply starting from the date it gets credited in the new account.

All of the ISA providers I've used have stuck to this, whether the transfer was electronic or by post.

This should actually be much less of an issue these days regardless of whether the guidelines are followed, as ISA transfers are usually carried out electronically within a day or two.

friolento

I have always received the interest without interrupt. You get interest from the old provider until the day of transfer, and from the new one the day after.

What are your providers who do not play by those rules?

bobfromcov

Thank everyone. I asked an AI to do the calculation. I am pleased about the rule which has been mentioned. I will keep you posted about my transfer from T212 to Moneybox and determine how many days interest if any were lost. I think I was looking at the statutory time suggested. Thanks everyone for your help. 

bristolleedsfan

bobfromcov said:

. I am pleased about the rule which has been mentioned. 

"Guideline" was mentioned rather than "the rule"

https://www.tisa.uk.com/wp-content/uploads/2023/03/Cash-to-Cash-ISA-Transfer-Industry-Guidelines.pdf  see no3

Albermarle

The 15 day maximum guideline is from start to finish of the process. I would think that even if took 15 days, your cash would only be in transit/not earning interest for much less time than that.
Even if it was 5 days that would only mean a loss 0.07%.

I asked an AI to do the calculation. 

Did you ask it if it had ever passed maths GCSE ?

Kim_13

I recently did a (paper, as no alternative with the providers involved) transfer and via the interest tracker in the Account Info section of the app of one provider, I know that they paid me interest up until the day they sent the cheque to the new provider. I probably had the worst case scenario in that they sent the cheque on a Friday afternoon, so it was obviously going to spend Sunday with Royal Mail. Transferred funds appeared online with the new provider on Tuesday, although not as available balance - but cheque clearance should be 2 days now, losing me less than a week even if the new provider do not backdate to the date on the cheque.

There are several options if you are concerned about interest loss: 

a) Never transfer unless it is internal (but this is likely to mean not getting the best deal and over the long term, losing more than you would have lost in interest to transfer.)

b) Only use providers who are signed up to electronic transfers, so the process is as quick as possible.

c) If you know that you will not use your full allowance and have enough to cover it, ‘self transfer’ - withdraw the money electronically (at which point it loses tax free status) and redeposit it electronically with a new provider.

d) Only transfer where there is some sort of gift voucher incentive to do so - cancelling out the lost interest - but again the ISA itself may not be the best deal over the term.

slinger2

Another alternative is to tie your money up for a year or two in a fixed-rate product. No temptation then to transfer before the term is finished.

Also: Don't transfer in March and April when some of the newbie providers are snowed under.