Building societies and banks in the UK have begun to report that cash ISA transfer requests have gone through the roof recently.
Thanks to new transfer rules that have gone into effect in the UK, savers have been able to benefit from more attractive interest rates by moving their money into accounts with a better rate of return. Additionally large banking providers such as Nationwide, Lloyds TSB, and Halifax have begun promising even speedier transfers.
Like both Lloyds TSB and Nationwide, Halifax has agreed to begin paying interest on the day a saver submits its application to it in order to transfer an ISA. ISA openings have risen by 180 per cent for Halifax in comparison with last year’s figures.
When taking interest into account a saver could have in excess of £73,500 in his or her ISA if they had put in their full allowance every year since the 1999 launch date. This doesn’t take into account any accrued interest however.
If savers don’t switch to a top ISA at 3 per cent but instead stay with their 0.5 per cent ISA, they could lose out on £1,700 yearly in tax-free interest. Even if a saver had only £10,000 in their ISA the interest lost every year would amount to £250.
Before the reforms were put into place, ISA providers had a maximum of 30 days to complete the ISA transfer process. However even in light of this 30 day deadline it could take as much as six months in some cases to complete the transfer.
Savers ran the risk of earning reduced levels of interest and being cut off from their money in such circumstances. Moreover banks and building societies were accused of not devoting sufficient resources to being able to resolve the issue and pointed the finger at each other for the whole mess.