New ISA guidelines: bark or bite?

By Gemma Ashman
BBC Radio 4's Money Box

Since the credit crunch, cash savings have become more popular

Cash ISA transfers could still take more than four weeks despite new guidelines.

Angela Knight, chief executive of the British Bankers' Association says the aim is to "get it done quicker".

The proposals follow customer complaints about long delays and lost interest.

But although the guidelines could speed the transfer up to 23 working days, without loss of interest, they are not enforceable.

Cash bonus

Keeping savings in cash has become much more popular since the start of the credit crunch.

And cash ISAs in particular have seen more interest, due to their tax-free status.

Customers wanting to benefit from the best rates can transfer their money between some providers.

It is not the intention for there to be any dead areas as far as interest is concerned

Angela Knight, chief executive, British Bankers' Association

But many found the process cumbersome, as cheques and paperwork were physically moved from one bank or building society to another.

This could mean the transfer took months, leaving a customer's money in limbo.

And many had to complain to get lost interest restored.

Numerous complaints prompted the British Bankers' Association (BBA), the Building Societies Association (BSA) and the Tax Incentivised Savings Association (TISA) to get together to think up a solution.

Suggestions

One problem highlighted was the delay caused by information either being incomplete, or being lost between one provider and the next.

The guidelines set out to address this communication flaw, and under the proposals the process would be standardised:

If a customer decides to swap providers, they go to the new ISA manager who becomes responsible for communicating with the previous ISA manager, after a standard form has been filled in.

There are then set times for each part of the process and customers should be informed of any delays.

But what about the interest?

Angela Knight, chief executive of the BBA told Money Box "It is not the intention for there to be any dead areas as far as interest is concerned."

These guidelines are there to... avoid, wherever possible, any problem arising

Angela Knight, chief executive, British Bankers' Association

So the day after the money leaves one provider, it should start gaining interest from the new provider.

But the process still relies on paperwork and cheques, as it has from conception.

That too is under review says Angela Knight:

"We want to move to electronic transfer now we know that we've got a product that is going to stay and is not going to change.

"The work on that starts in September - so only in a few days time."

In practice

So for now, even following the guidelines, the process retains its paper trail and could still take more than a month.

And the guidelines are just that - they are not enforceable rules.

But Angela Knight said that although there may not be any redress for customers, the guidelines show that the industry recognises that individuals "want something more."

"I cannot promise that, in a very large industry, everything will be perfect with every ISA manager every time.

"What I can say is what these guidelines are there to do is to avoid, wherever possible, any problem arising."

BBC Radio 4's Money Box was broadcast on Saturday,
30 August 2008 at 1204 BST.