Many simply perceive it as too much hassle and don’t even bother trying to switch, instead leaving their money languishing in an account paying a pitiful rate of interest, and some of those who do try to switch find the process long and frustrating.
The Office of Fair Trading recognise that this was a problem and it’s announced new measures which take effect in January 2011, designed to simplify and improve the ISA transfer process.
However, Halifax has thrown down the gauntlet to other banks and building societies to take action sooner. It’s announced a new ‘cash ISA promise’, which it claims will simplify and improve the switching process. But will it? I’ve come to speak to Russell Galley who is Managing Director of Savings at Halifax to find out exactly what it’s going to mean for savers.
Russell Galley: With an ISA, you can have a fixed rate, you can have a variable rate just as with any other product, but better than that you get your interest entirely tax-free. So, from my perspective the first place anyone should save is in an ISA.
What is the cash ISA problem?
The ISA transfer is the biggest single source of complaints we get in savings, so it’s a clear issue for our customers.
I think the issue is two-fold – firstly it’s a very manual process, so each individual provider has its own forms, we have to send by post, there’s no automation, and that by definition makes it a long-winded process. And secondly, the provider who is losing the ISA is the one who has to complete the deal, and consequently if they decide not to prioritise or resource correctly, that impacts customers.
You can see customers not get the rate they expected for up to 26 days, and miss 5 days interest in total, and we just felt that that wasn’t good enough.
What is the Halifax cash ISA promise?
So the first is very, very simple – that on the day that you come in and complete the ISA transfer form, from that day you will get the new rate. There’s no hidden catches, the customer has absolute certainty, no matter how long their existing provider takes to give us the money. That’s a really big benefit for customers.
There are a couple of other things we’re promising. Firstly is transparency in terms of communication, so we’ll tell them where the process is at any time, we’ll also tell them when their deal comes to an end. And of course, with our products, anyone can access the product – it’s not just available to new customers.