A new system from Halifax for transferring cash ISAs could save customers £24million a year in lost interest.
Halifax's Cash ISA Promise is, it says, "an industry leading move to help drive a fairer deal for customers when transferring their cash ISA." Currently, customers are losing out when they leave an existing provider for a new one, and are reliant on their old and new providers to carry out the process on their behalf.
Reacting to research by the Office of Fair Trading, which found that it takes an average 26 days to transfer an ISA, Halifax estimates that savers lose as much as £24million a year in interest during the transfer process.
The benefits of switching to a new cash ISA to get a better rate could be negated by the cost of lost interest, so Halifax has taken the lead to 'shake-up' the cash ISA transfer industry.
Halifax has identified the key issues facing customers as losing the benefit of a better deal in the transfer process, access to the 'best buy' deals only being offered to new customers, a lack of transparency of interest rates on statements, and a lack of advance notification when any initial reward or fixed rate is due to end.
The Halifax Cash ISA Promise, which takes affect from 2 October, addresses these issues. It pledges to pay interest from the first day that a customer has completed an ISA transfer application form; it will see that Halifax cash ISAs are available to both new and existing customers; from July next year, interest will be clearly displayed on cash ISA statements, online, in branch, and over the phone, and customers will receive advance notice if any initial interest rate is due to end.
Halifax's 'market leading' cash ISA Direct Reward was launched last week, offering a variable rate of 2.80 per cent AER for 12 months, tax free. Existing Halifax current account customers will be rewarded with a higher rate of 3.00 per cent.
"The cash ISA is a great, tax efficient, way to save and is at the heart of many families' approach to building a nest-egg," said Russell Galley, managing director of Halifax savings.
"Improving the transfer process between providers is vital. When a customer chooses to move their money from one cash ISA provider to another they cannot do so themselves without losing the tax advantage of a cash ISA."
Commenting, Andrew Hagger from Moneynet.co.uk, said: "If we are to have any chance of maintaining consumer confidence in tax free savings particularly when rates are so poor, it needs to be a straightforward and painless process to manage and move your money between providers.
"It is good that Halifax has decided to grasp the nettle and agree to pay interest on ISA transfers from the moment it receives a completed ISA transfer application. They have set the benchmark with this proactive shake up of their processes and others will surely follow this lead or risk losing competitive advantage."
© Fair Investment Company Ltd
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