Savers will soon benefit from instant interest on cash ISA transfers with Halifax, as the bank announces it will speed up the traditionally slow process.
Part of Lloyds Banking Group, Halifax is the first bank to offer instant interest on Cash ISAs, paving the way for other banks to follow suit.
The ‘Cash ISA Promise’, which takes effect from the 2 October 2010, aims to make the cash ISA transfer system more transparent for customers.
Current ISA transfer policies are renowned for being poor, with cash transfers between providers known to take weeks or even months, resulting in a loss of interest for the customer.
Research from the Office of Fair Trading (OFT) found that on average, switching cash ISAs took 26 days, while a quarter of transfers took longer than 30 days.
Halifax estimates this delay can cost customers £24 million in lost interest every year.
The cash ISA promise includes several other benefits: Halifax cash ISAs will be available to both new and existing customers, and the interest rate will be clearly stated on ISA statements and online. In addition, Halifax cash ISA customers will receive advanced notice when any reward or fixed rate period is due to end.
Deepa Bose, spokesperson for Halifax, says: “The onus is no longer on the customer, but the provider to get the transfer right. There should be no barriers to transfer money in and out or to prevent customers earning a good rate of interest. We’ll give a great rate from day one.”
The ISA transfer process as a whole is under review by watchdogs. New OFT guidelines have stipulated from 31 December 2010, transfers must be completed within 15 days, and from 2012 banks must clearly publish the current rate on all statements to customers.
A spokesperson for Santander insists it also backdates interest from the date the transfer leaves the existing ISA, not the date it is received, therefore the customer should receive no loss of interest.
They added: “Santander fully backs the development of the ISA transfers process having signed up to the electronic transfer scheme, developed by the British Bankers’ Association, in order to speed up the process and make it more efficient.”
Barclays, also says it provides a transparent service for its ISA customers.
Emma Austin, spokesperson for Barclays, says: “We have for a number of years displayed interest rates on statements, online, in branch or over the telephone for all our savings accounts, not just cash ISAs.
"For Golden ISA Issue 2 customers who currently receive a 1% bonus, there will be two months notice given when this is due to come to an end.”