The Government's consumer watchdog, Consumer Focus, has filed a 'super-complaint' with the Office of Fair Trading about Individual Savings Accounts (Isas). They are complaining that cash Isa providers place a number of 'unfair obstacles' in place to stop savers moving their money to Isas paying better rates.
Consumer Focus has shone a light on a system that like so many financial schemes is shrouded in unnecessary complications and regulations.
One of the problems Consumer Focus have complained to the Office of Fair Trading about is the length of time it takes to switch Isa providers. Government guidelines recommend that a transfer should take no more than 28 days. But 28 days is ludicrous the banks insist they need that much time to do the paperwork and transfer the money. But given that they are perfectly capable of transferring money between themselves in a matter of hours when needs be, that seems unlikely.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Admittedly, customers don't suffer too much most banks receiving an Isa transfer will credit interest from the day they received the application rather than the day the funds arrived. But the length of time it takes is boring and off putting: most of us like our transfers to happen fast we don't want to still be double-checking accounts a month later.
But this isn't the only thing that prevents people moving out of accounts with very low interest rates and into better ones. Fear plays a part too fear of losing your money's tax-free status by mistake.
If you see an Isa rate you like and don't follow the strict Isa transfer rules when moving your money, you can all too easily find you have shifted it out of its tax wrapper and that you can't reinvest it without using up your current year's Isa limit.
The upshot of all this is that - despite the fact that the average rate paid on a cash Isa is 0.41% - only 12% of Isa holders switched provider last year.
All this means that a shake-up of the Isa industry is desperately needed. But what kind of shake-up? Consumer Focus are keen on transparency and on faster transfers. But surely an altogether simpler system where people can move their money in much the same way as a standard bank transfer is the way forward.
-
Will the Bitcoin price hit $100,000?With Bitcoin prices trading just below $100,000, we explore whether the cryptocurrency can hit the milestone.
-
Inheritance tax receipts jump 11% even before Autumn Budget overhaulOfficial figures show inheritance tax receipts are rising even before the chancellor’s changes to reliefs
-
Our pension system, little-changed since Roman times, needs updatingOpinion The Romans introduced pensions, and we still have a similar system now. But there is one vital difference between Roman times and now that means the system needs updating, says Merryn Somerset Webb.
-
We’re doing well on pensions – but we still need to do betterOpinion Pensions auto-enrolment has vastly increased the number of people in the UK with retirement savings. But we’re still not engaged enough, says Merryn Somerset Webb.
-
Older people may own their own home, but the young have better pensionsOpinion UK house prices mean owning a home remains a pipe dream for many young people, but they should have a comfortable retirement, says Merryn Somerset Webb.
-
How to avoid a miserable retirementOpinion The trouble with the UK’s private pension system, says Merryn Somerset Webb, is that it leaves most of us at the mercy of the markets. And the outlook for the markets is miserable.
-
Young investors could bet on NFTs over traditional investmentsOpinion The first batch of child trust funds and Junior Isas are maturing. But young investors could be tempted to bet their proceeds on digital baubles such as NFTs rather than rolling their money over into traditional investments
-
Negative interest rates and the end of free bank accountsOpinion Negative interest rates are likely to mean the introduction of fees for current accounts and other banking products. But that might make the UK banking system slightly less awful, says Merryn Somerset Webb.
-
Pandemics, politicians and gold-plated pensionsAdvice As more and more people lose their jobs to the pandemic and the lockdowns imposed to deal with it, there’s one bunch of people who won’t have to worry about their future: politicians, with their generous defined-benefits pensions.
-
How the stamp duty holiday is pushing up house pricesOpinion Stamp duty is an awful tax and should be replaced by something better. But its temporary removal is driving up house prices, says Merryn Somerset Webb.
