Written by Karen Bryan
In early April 2012 my husband began the transfer of his Cash ISA pot from a Halifax 12 month bonus account, which expired on 15 April 2012, into a Birmingham Midshires (BM) 2 Year Fixed Rate Cash ISA, which was paying 4.05%.
On the 23 April he received a letter from BM, dated 19 April, saying that they sent the Cash ISA transfer form to the Halifax on 11 April but had not received the funds or any response from the Halifax.
My husband logged into Halifax, to see that they had closed his Cash ISA on 16 April. He then phoned BM to check if the money from the Halifax had arrived, but still no show. The BM employee said that Cash ISA transfers are often done by cheque. That’s bad news if you have to factor in Royal Mail delivery, then add another 3 days for a cheque to clear.
Surely the transfer could by done through the free of charge Faster Payments scheme (which takes two hours maximum), as the Halifax and BM are both part of the Lloyds Banking Group. A free of charge BACS payment takes three working days, so my husband’s Cash ISA pot should have reached the BM account by the 20 April, if Halifax had initiated a BACS payment on closure of his account on the 16 April.
On 27 April 2012 my husband received a letter from BM, dated 24 April, saying that his Cash ISA transfer had been deposited in the BM 2 Year Fixed Rate Cash ISA on 16 April. It would appear that the BM are going to pay interest on my husband’s Cash ISA during the transfer period. However I couldn’t find anything about this policy on the BM website.
When searching the BM site regarding interest during Cash ISA transfers, I noticed the rate of interest on their 2 Year Fixed Rate Cash ISA account has now fallen to 3.6%, a drop of 0.45%; fortunately he is getting the previous higher rate, I assume locked in when he made the online application for the BM account.
I think that all banks and building societies should adopt the “pay interest on your Cash ISA during transfer” advertised by the Halifax and Nationwide (although aparently also offered by BM). If your Cash ISA savings earn no interest for days or even weeks during transfer, that effectively reduces the headline rate of interest.
I also wish that financial institutions were required to offer Cash ISAs in any savings accounts, as I’ve sometimes seen higher rates of interest on standard savings accounts than are available in Cash ISA accounts.