There are about 17 million people in the UK who save a total of Â£153 billion into Individual Savings Accounts (ISA). Of these some two million switch their funds every year to chase the best rates.
But the slow process for switching funds costs those saversÂ millions of pounds a year in total.
According to the Telegraph the Office of Fair Trading has published a report that shows the average time taken to switch an account is at a snail’s pace of 26 days. The OFT says this should get down to 15 days by the end of 2010 and work towards being just a ‘handful of days’. The OFT wants the Financial Services Authority (FSA) to step in and impose fines on slow providers.
When a saver applies to switch their funds their current provider hangs about and doesn’t send the cheque to the new provider until they have to and then by second class post. The client is therefore stuck on a very unfavourable rate for about a month. Then the cheque takes a further 5 days (usually working) to clear.
The OFT say that if Banks want to be trusted they should be as diligent when transferring ISAs as they are in charging customers who miss a payment by one day.
When transferring money from one ISA into another you must not just withdraw the cash and take it to another bank as that would count as an account closure and the loss of tax efficient benefits.
You should open the new account then ask the old provider for a transfer form with your new account details. Sometimes the new provider can arrange all of this for you.
Also bear in mind that there are two types of ISA, the cash ISA and the stocks and shares ISA.
If you are considering a transfer it would be advisable to talk to an Independent Financial Adviser, especially for a sizeable transfer.