Cash ISA transfer process - A fairer deal

Individual Savings Accounts (ISAs) are big business: over 17 million Britons hold a total of £143 billion in cash ISAs. However, recent investigations by the Office of Fair Trading (OFT) are set to ensure a fairer deal for ISA savers. Typically, around 11% of ISA holders will switch their cash to a new provider each year. However, in response to a "supercomplaint" from consumer watchdog Consumer Focus, the OFT found that cash ISA transfers take an average of just over 26 calendar days, with a quarter of transfers taking longer than 30 calendar days. Current industry guidelines indicate that the transfer process should take no longer than 23 working days. As part of its findings, the OFT has reached an agreement with the financial services sector to ensure that transfers and interest rates on cash ISAs are more efficient and transparent than at present. The OFT has recommended that, from 31 December 2010, transfers should take no longer than 15 working days. Consumer group Which? wants the transfer process to take no longer than 10 days, and also wants a fully electronic transfer system to be set up. The OFT has recommended the Financial Services Authority should undertake research to see whether an electronic transfer system is feasible. At present, the old provider sends details and a cheque to the new provider through second-class mail. The OFT found that, during the transfer process, there is a period of up to five days when the consumer receives interest from neither the old provider nor the new provider. The OFT has deemed this unacceptable, stating that transferring savers should always receive interest on their money. Moreover, the OFT announced that the new rate of interest should be paid after the recommended 15-day transfer period – even if the transfer remains incomplete – and wants interest rates to be published on statements from 2012. At present, only around 15% of ISA savers receive statements that include their interest rate. The OFT also wants consumers who have applied for fixed-rate products to be guaranteed the rate of interest advertised at the time of application. The OFT commented: “There is often strong competition between providers in this market to win new savings, the transfer of cash ISAs is taking too long and there is not enough transparency over interest rates. The voluntary changes announced today will give consumers a fairer deal and drive stronger competition.”