Nationwide has temporarily stopped accepting transfers into its cash ISA after a 400% increase in the number of requests.
The building society, which is the second largest cash ISA provider in the UK with around four million customers, says the suspension is a temporary measure while it clears its backlog of applications. It has received tens of thousands of requests for ISA transfers so far this tax year, resulting in long delays and sluggish service.
Roy Beale, a spokesman for Nationwide, refused to set a date when transfer requests would be accepted again, but said it would be a matter of weeks rather than months.
He added: “The amount of requests we have received have been beyond what we predicted – we were expecting an increase of 100% from last year but instead we’ve seen a 400% increase.”
Beale puts the rise in applications down to the current climate: “People want to move their money into a building society rather than a bank. Plus our fixed-rate ISA bond has been very popular.”
The building society will honour all applications received prior to Monday 7 July, but all other applicants will have to wait until the backlog is cleared. However, customers who have another ISA with Nationwide and want to make a transfer are not affected, and transfers into equity ISAs continue to be accepted as normal.
Beale says customers caught up in the problems will not be left at a financial disadvantage because Nationwide will backdate interest.
However, new rules from the Treasury mean that banks and building societies can only make backdated payments from the date they receive your application – not the funds.
Beale says that customers who go to their old ISA provider to arrange a transfer – with the funds sent straight across - are therefore at risk of not receiving their full backdated interest.
Nationwide's current fixed-rate ISA range allows you to fix an AER of 6.15% for one, two or three years, on deposits from £1. However, until further notice transfers are not accepted so if you are looking to open a new ISA and have a transfer to make then you will have to look elsewhere.
If you want a fixed-rate ISA, then Julian Hodge Bank pays 6.5% AER forone-year and accepts transfers. You’ll need to deposit the full £3,600upfront though. It also offers two-year and three-year accounts bothpaying 6.4% AER.
Or Skipton pays 6.4% AER on deposits from £50. This rate is fixed until 14 December 2009
For a variable rate ISA, Ruffler Bank currently offers one of the most competitive ISAs, paying 6.25% AER on deposits from £3,600. However, you will need to give 30 days' notice if you want to make a withdrawal.
Alternatively, Icesave offers an easy access ISA paying 6.1% on deposits of £1,000. If you have less to save, then Barclays pays 6.25% AER on deposits of just £1 and allows instant access. However, this rate includes a 1% bonus for 12 months.