Savers attempting to move their money between different types of Isa have been left in limbo due to lengthy transfer delays, This is Money has found.
One reader told This is Money that the transfer of her life savings from a Virgin Money stocks and shares Isa to a Virgin Money cash Isa, had to be completed by cheque which got lost between departments, leading to a six week delay – and counting.
Another says she has been waiting for her savings to be transferred from a now defunct Virgin Money help-to-buy Isa to a Barclays cash Isa since February 2023, meaning she has missed out on almost six months worth of interest.
Both are wondering why a seemingly simple transfer of hard-earned savings is taking so long – and whether the interest will be backdated.
We looked at how long an Isa transfer should take, why the process might be delayed – and whether switching from stocks and shares to cash is a good move at the moment.
A few banks still make transfers between stocks and shares Isas and cash Isas by cheque, while the majority are able to do it by a BACS payment
Helen Kirrane of This is Money says: I will look at the internal transfer with Virgin Money first.
You would think moving a sum of money from one arm of a bank to another would be straightforward and quick enough, but that doesn’t seem to be the case here.
Over 90 per cent of transfers between a stocks and shares Isa and a cash Isa are electronic and carried out by a BACS payment, so banks that ask for a cheque are unusual in this sense.
I asked three money experts how long someone should expect to wait for an internal savings account transfer, and whether there is anything they could do to speed it up.
How easy is it to move money within one bank?
Katja Stout, personal finance expert at Quilter replies: This very much depends on the provider.
Unfortunately, many banks and building societies still operate on old technology systems, so aren’t as adept as some of the new players or investment platforms at transferring things completely online – also known as ‘straight-through processing’.
Many of us no longer own a cheque book, while some younger customers won’t even know what one is, so it is important to check how you can move your money between accounts before you sign up. As with this case, post can get lost rather easily so a lack of digital services should be a red flag before opening any account.
Laura Suter, head of personal finance at AJ Bell replies: How the money is sent depends on the receiving provider’s terms. Some banks do indeed still require cheques. It depends entirely on how the cash Isa provider operates.
A spokesperson from Virgin Money replies: Currently, the majority of transfers from our stocks and shares Isas are processed by default as a cheque and posted to the new provider.
In the near future, as we make improvements to our investments and pensions services offering, transfer funds will be sent electronically where possible. In cases where it has not been possible to complete the transfer electronically, a cheque will still be sent.’
What about transfers between banks?
Helen Kirrane of This is Money replies: When it comes to transfers between Isa providers, it depends on the case and systems used by the banks and can vary.
Cash Isa transfers tend to be quicker and should take no more than 15 working days. It should take no more than 30 calendar days for other types of Isa, including stocks and shares.
Barriers to a quick transfer in time include if share classes have to be converted, which is the case with exclusive shares.
A spokesperson from Barclays replies: We acknowledge there have been delays in setting up our customer’s Isa, and we have apologised that on this occasion we have failed to provide the high levels of service that our customers can expect to receive.
‘We can confirm that the transfer has now been correctly re-initiated. We will ensure that our customer is not financially disadvantaged as a result of the delay, and we have offered an additional payment for the inconvenience caused.
Will the interest be backdated if there are delays in transferring?
Helen Kirrane of This is Money replies: Whether or not the interest is backdated due to a delay in transferring funds is at the discretion of the provider.
If a transfer between Isas is delayed due to a reason which was not the customer’s fault, it is only right that the provider investigates the situation and responds to the customer accordingly.
In the cases of both readers, they have been missing out on interest that their savings would have been accruing had their savings been transferred swiftly to the new accounts so it is only fair that the interest would be backdated.
How long should it take?
The short answer is that it depends on the provider you are with when transferring from a stocks and shares Isa to a cash Isa.
Myron Jobson, senior personal finance analyst at interactive investor replies: We aim to complete within seven calendar days [when transferring money out] and on transfer-ins we aim to complete within three to four weeks, but this is subject to the counter-party engagement.
Laura Suter replies: The transfer out time is normally six to seven calendar days in total. The main factor determining the time is the need for the customer to dilute their investments – some funds have a four day turnaround on this.
Katja Stout replies: This very much depends on the investments that are held. If they are standard funds or stocks and shares, then it should just take a few days to sell these and get the cash available.
If there are more complex investments held within the Isa these may require more time. Then once the assets have been sold, the transfer can then take place, and this is reliant on the systems used.
Transferring accounts internally with a provider shouldn’t be a difficult process, but especially where Isas are involved, more information may be required to verify tax statuses and the like.
Is it a good time to switch investments for cash?
Katja Stout replies: With where cash savings rates are at just now, it might seem tempting to stop investing and instead secure a guaranteed 4 per cent or 5 per cent each year on a savings account.
However, inflation remains elevated and as a result savers need to take this into account to fully understand what their return on a fixed cash rate would be. Inflation currently stands at 6.8 per cent, so even a cash rate of 5 per cent would mean a net loss of 1.8 percentage points.
Investing, on the other hand, provides savers with the best potential to beat inflation over the long term, particularly as markets continue to recover following a difficult 2022.
Investing horizons should be set for five years or more, however, so if you do need the cash sooner, then having it in a high-yielding savings account may be more appropriate.
Savers are finally seeing better rates on savings accounts, but experts warn to beware of 7.9% inflation which could see them making a net loss as the best easy-access account offers 5%
Laura Suter replies: We’re a nation that loves cash, and with cash interest rates rising we’re finally getting rewarded for that love affair.
Interest rates have risen considerably, with the top easy access cash account going from 0.5 per cent two years ago to 5 per cent today, according to Moneyfacts.
That means people with a meaningful pot of money are getting hundreds of pounds a year in interest on their cash, rather than the handful of pounds they were getting before.
But you’ll only benefit if you’ve moved your money to a top-paying account, as banks are notoriously bad about just handing over the higher rates.
If you’re not getting near 5 per cent on your easy-access savings you should shift your money today. Fixed-rate accounts will pay more, so if you know you don’t need the money for another year or two you can lock it up for bigger returns.
There are, however, two big factors you can’t ignore. The first is inflation, which is still running far above cash rates and means that your cash is losing buying power in real terms.
The second is the longer-term view. Studies of stock market returns over the long term show that they average around 5 per cent, after inflation, so around 7 per cent at usual rates of inflation. That’s far higher than you’re getting on cash, particularly over longer periods.
Myron Jobson replies: When deciding between a stocks and shares Isa and a cash Isa, it is important consider your goals and risk tolerance.
If you’re thinking long-term and can tolerate market fluctuations, a stocks and shares Isa offers potential for higher returns. On the other hand, if you prefer stability and a guaranteed return, a cash Isa might be more suitable – especially if your investment horizon is shorter.
While past performance is not indicator of future results, a look back at history shows that you have a far better chance to produce returns that outstrip inflation than the interest you will get on cash savings.
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