Which? mystery shopping shows bank staff still unclear on Isa rules

In this week’s Budget, the Chancellor announced new Isa savings limits, greater flexibility over withdrawing funds and ‘Help to Buy’ accounts. Yet as the Isa deadline approaches, we found bank and building society staff’s knowledge of cash Isas is shockingly poor and could be leaving customers out of pocket.

Our undercover investigation found that even before the Budget reforms, banks are struggling to explain existing rules. Isas are supposed to be simple savings products, but when we posed as new customers to ask straightforward questions about savings limits and transfers we found:

  • Co-operative Bank and Yorkshire Bank were bottom of our table answering just 31% of questions correctly.
  • Eight in ten (85%) of staff failed to correctly identify the new 2015/16 Isa limit of £15,240. In fact, some banks hadn’t updated their systems for their staff to look the figure up.
  • Even the best performer, TSB, only managed to get two-thirds of our questions (64%) right.
  • Just 19% of call handlers were able to correctly answer questions about new Isa inheritance rules.
  • Widespread confusion and poor information about Isa transfer rules – despite these being established for years.
  • Bank staff suggested we refer to the internet to find the answer to our question or admitted they weren’t aware of stocks and shares Isas.

Richard Lloyd, Which? executive director, said:

‘It is inexcusable for so many bank staff to have such a worrying lack of knowledge about the basics of Isas, especially when it could be costing customers dear. Banks should have systems in place to ensure customers can rely on them to give up to date and accurate information.

“With new reforms announced by the Chancellor this week, the banks must do better, starting by properly equipping their staff so customers can be confident they’re getting the right advice about how to make the most of their hard-earned savings.”

Which? is running the Scrap the Savings Trap campaign which calls for quicker Isa switching and for interest rates and terms for all accounts to be clear, easier to compare and provided regularly to customers. The campaign already has 58,000 supporters and you can sign our petition here

NOTES TO EDITORS

1.  In January 2015, we made 156 anonymous calls to 13 of our biggest banks and building societies (each provider was called 12 times) and asked:

  • How to correctly transfer an Isa from one provider to another.
  • Are there any rules about how much you can transfer?
  • Two questions about rules around transferring between cash and stocks and shares Isas
  • What is next tax year’s Isa allowance?
  • The new Government rules on inheriting Isas.

2.    The full results of our mystery shopping survey are here:

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3.   In this week’s Budget, the Chancellor announced:

  • Annual savings limit for Isas to be increased to £15,240.
  • A “Fully flexible” Isa will allow savers to withdraw money and put it back later in the year without losing any of their tax-free allowance.
  • A new “Help to Buy” ISA for first-time buyers will allow government to top up by £50 every £200 saved for a housing deposit.

4.  Nationally there is £470 billion deposited in cash Isas and 71% of Which? members currently save into one.

5.  A quick summary of current cash ISA rules:

  • To correctly transfer your Isa from one provider to another, you contact the company you want to move to, which suppliers you with a Cash Isa Transfer Authority form. Once completed, your new provider will manage your switch. You should never manually withdraw savings and reinvest them as this results in the loss of tax-free benefits.
  • You can only hold one ‘active’ Isa per tax year, so if you want to transfer your current Isa to a new provider, you have to transfer the full amount you have saved. Once transferred you can top up your current Isa with the new provider as long as you do not exceed your cash Isa allowance (£15,000 currently, rising to £15,240 in the next tax year)
  • However, if you have Isas from previous years, you can transfer as much or as little of your savings as you like.
  • Since July 2014 you can transfer stocks and shares Isa deposits to a cash Isa and vice versa. The £15,000 limit can be held in any combination of cash and stocks and shares. There is no limit on the number of times you can switch between cash and stocks and shares.
  • Under new rules announced last December, an Isa’s tax-free wrapper can now be inherited by a surviving spouse or civil partner. This applies to anyone who dies after 3 December 2014. From April, the surviving spouse will receive an increased Isa allowance, equivalent to the size of the deceased person’s Isa at the time of death to allow them to shelter the inherited funds tax-free in their own name. Interest earned is taxable while someone’s estate is in administration, but not once the savings have been transferred over to the inheriting spouse.

6. People can compare Isas to find the best one for their needs at Which? Money Compare – http://moneycompare.which.co.uk/savings-and-isas

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