Loss of interest on transfer of cash ISA to new provider

charlieboycat

Apologies for asking since the answer is bound to be found somewhere in the guides or the forum - but I didn't find it. For how long might I reasonably expect to be earning no interest at all (from either old or new provider) when transferring a cash ISA?

From what I've read here, I understand that to effect a transfer of a cash ISA the old provider actually posts a cheque to the new provider (how arcane is that?). I assume (please correct me if I'm wrong) that intererst from the old provider will cease to accrue as of the date the cheque is written (and that the accrued interest will be included in the value of the cheque). I also assume (again, please correct me if I'm wrong) that interest from the new provider will commence to accrue in accordance with their normal rules for cheque deposits (eg. 2 (or 3) working days after receipt) - unless of course they offer a special back-dating enticer like I recall Halifax did last year.

Absent a Halifax-type sweetener therefore, it seems to me that the very best one could achieve would be cheque written and posted on Monday, received and banked by new provider on Tuesday, earning interest with new provider on Thursday (2 days after receipt) - leaving only three days without earning interest anywhere. But I suspect life isn't like that. So what is a more likely scenario? Cheque written Thursday, posted (2nd class) Friday, delivered Tuesday, processed/banked by new provider Thursday, earning interest from following Tuesday (3 working days after processing/banking) - leaving 12 days without earning interest anywhere?

Am I correct therefore to assume that I might not earn any interest at all for up to two weeks? Or is this being unduly pessimistic?

Of the various potential causes for an extended loss of interest, the one that concerns me most is a delay by the new provider in processing/banking the cheque. Especially if they are in receipt of a lot of transfers at once (eg. because of a new issue at a good rate). Does anyone have any bad experiences of extended total loss of interest for this reason? Any particular providers to avoid as transferees?

Thanks in anticipation

Charlie

10_66

Some building societies will start your transferred in account dated from the day after your old account was closed, eventhough the cheque will have taken a number of days to reach them. This is not the case with all though, because I made enquiries with one or two, who did not operate on this basis and would only start your new transferred in account from the day they receive the cheque. Last year I experienced a nightmare when transferring from A & L to Abbey. Abbey lost my cheque, not once, but twice! Fortunately, after a million phone calls and stopped cheques etc (and much frustration!), they did actually open the account effective from the day after the old one had been closed. If they hadn't done that I would have lost 2½ months interest, as that's how long it took them to sort it all out.

charlieboycat

10_66 wrote: »

Some building societies will start your transferred in account dated from the day after your old account was closed, eventhough the cheque will have taken a number of days to reach them. This is not the case with all though, because I made enquiries with one or two, who did not operate on this basis and would only start your new transferred in account from the day they receive the cheque.

Thanks 10_66. I hadn't realised that the Halifax back-dating wasn't a one-off, so this becomes a question to ask all providers I might consider as as a possible transferee.

10_66 wrote: »

Last year I experienced a nightmare when transferring from A & L to Abbey. Abbey lost my cheque, not once, but twice! Fortunately, after a million phone calls and stopped cheques etc (and much frustration!), they did actually open the account effective from the day after the old one had been closed. If they hadn't done that I would have lost 2½ months interest, as that's how long it took them to sort it all out.

That's Abbey ruled out for me!

Regards
Charlie

Primrose

If you can avoid it, I don't think the best time to try and transfer a Cash ISA is towards the end of any tax year or the beginning of a new one because this is the time when banks and building societies are likely to be snowed under with the administration associated with people rushing to use up their allowance before the tax year runs out, or to take out a new one as soon as the new tax year starts. So avoid March and April wherever possible.

charlieboycat

Primrose wrote: »

So avoid March and April wherever possible.

Thanks for the tip Primrose. I've probably procrastinated long enough on this one - it will give me something to do next month!

Regards
Charlie

bristolleedsfan

Quote:
Originally Posted by charlieboycat
. But I suspect life isn't like that. So what is a more likely scenario? Cheque written Thursday, posted (2nd class) Friday, delivered Tuesday, processed/banked by new provider Thursday, earning interest from following Tuesday (3 working days after processing/banking) - leaving 12 days without earning interest anywhere?




That exact scenerio did occur to me in December. Nationwide were transfer out ISA Manager in that instance, although the delay appears to have been due to a combination of cheque being posted out towards end of week, Post having not recovered from National strike action ( Cheque Posted 29th November) Transfer in ISA Manager operating a interest on 3rd working day following receipt policy. :mad: ( a policy which is currently under review at that BS) Nationwide very kindly ensured that i didnt lose any interest on their transfer out cheque. :T


Perhaps Kazza could add the info as to when Providers start paying interest on ISA transfers in so that the providers realise that they are not just competing for "Best Buy Rates" they are also competing for "Best Deal" on minimal or no loss of interest on ISA transfers in. :beer:

So if people post the info regarding this, perhaps kazza can add the info to the first page.

Re: Nationwides 1 and 2 year ISA fix as Milarky has mentioned on numerous occasions, Nationwide start paying interest on ISA transfer ins by the date on transfer out cheque so no interest is lost if transferring a ISA to Nationwide BS. :T

Leek BS, From experience a transfer out cheque went to Leek BS dated 29th November, Leek BS automatically opened new ISA transfer in account on 29th November and started paying interest from 29th November so no loss of interest incurred transferring to Leek BS. :T ( While Leek BS are outside best paying ISAS atm its worth keeping the others on their toes. :cool:

Loughborough BS i will enquire on monday to find out when Loughborough start paying interest on ISA transfer ins.

Scarborough BS are famous for launching Best Buy Accounts, they are not famous for keeping accounts as Best Buy Accounts. ( For those with Scarborough Regular Savers, Scarborough used the last 0.25% Base Rate decrease as an opportunity to reduce its regular saver rate by 0.30% now paying 6.50% on both its ISA and non ISA versions)

charlieboycat

bristolleedsfan wrote: »

Nationwide very kindly ensured that i didnt lose any interest on their transfer out cheque.

Nationwide actually wrote a second cheque to make up for the interest lost due to postal etc delay? Well I'll be. Did they send the second cheque to the transferee provider so as to keep it within your ISA? Or did it come straight to you (thus losing ISA status)?

Anyway, thanks for the other info bristolleedsfan.

Regards
Charlie

bristolleedsfan

charlieboycat wrote: »

Or did it come straight to you (thus losing ISA status)?


Regards
Charlie

Was nice suprise though. ( transfer in ISA manager offered no help at all , guess ill bear this in mind when i both decide where to move my 2007/08 Barclays Taxbeater ISA out to and when i decide where to invest my 2008/09 ISA allowance. )

ISA transfers are unique in that the saver has absolutely no control over the movement of his/her funds and they are in essence account transfers albeit with a different ISA manager.

The way Building Societies post cheques to each other nobody would think that they all belong to the same association and once acted as a "cartel" ( holding monthly meetings to decide what would be its ( all the Building Societies) morgage rate.

If a third party chooses to post a cheque rather than other methods i.e BACS or even one Building Society making payments to another BS periodically with interest why should the saver lose interest while the funds are in transit. :think:

It should also be remembered that when someone makes a withdrawal and/or a transfer between different Building Societies by cheque they stop getting paid interest immediately even if the cheque is being posted, so IMO its basically cheeky for a Building Society to say that they wont pay interest on cheque deposits until they actually have the money.

Albeit compromise is now in force where "all" Building Societies/Banks have to start paying interest on cheque receipts from second working day ( instead of third working day)

Some Banks/Building Societies continue to pay interest on all cheque receipts from day of receipt or working day following receipt. :j

Ive been informed that the Banking Code "recommends" that ISA transfers are backdated so that no loss of interest is incurred,(" recommendation" rather than a compulsion it appears. :sad: )

Mikeyorks

charlieboycat wrote: »

Did they send the second cheque to the transferee provider so as to keep it within your ISA? Or did it come straight to you (thus losing ISA status)?

Compensation for delay in opening an ISA / accepting a subscription (direct or transferred) .... has to be paid outside of the ISA. The investor can (subsequently) pay it in to the ISA, but it becomes part of the subscription for that year.

smartiepants

I have a question!

My hubby and I are now in a position to open an ISA each, our first, with the full £3,000 each 2007/8. Would we then be able to open another ISA each in April at the start of the new tax year with a further £3,000 each 2008/9?

What happens to the previous tax years investment2007/8? do we have to withdraw it, or is it held in the same account earning interest tax free, or do we have to remove it from the ISA account and find a new home for it, but taxed? Or is this portion held in the ISA account but now taxed.

Sorry if this question is answered anywhere, I have looked and looked but can find only one reference to it, and would like it clarified.
Many thanks
xx

10_66

You can open an ISA now and put up to £3,000 in it. In April you can either add a further £3,600 (the new maximum limit from the new tax year) to the existing ISA, or instead, you can open a new ISA with a different ISA manager with up to the new maximum limit of £3,600. If you wanted to, you can transfer your old ISA to a new ISA manager (for instance, if they have a better rate of interest).