Cash ISAs fail to give savers a fair deal, a leading consumer watchdog has said.
The warning – from the Office of Fair Trading - comes in the wake of recent Allenbridge research (‘Non performing Cash ISAs’ - released 18.05.2010) showing that some Cash ISAs pay as little as 0.1% p.a. and that even market-topping accounts fail fully to protect savers from inflation.
Many accounts had to be closely monitored because generous introductory rates would suddenly fall to mediocre or poor rates. But Allenbridge clients reported that trying to improve Cash ISA rates by moving to another provider was slow and difficult, with some transfers taking a month or longer. In total, 17.5m investors have £143 billion in Cash ISAs.
The OFT has now ordered greater transparency over interest rates and a significant reduction in the time it should take to transfer between Cash ISA providers, following agreements with banks and building societies.
But the changes will be phased in between the end of this year and 2012 so there will be no immediate improvement.
After a 90-day investigation in response to a Super Complaint from Consumer Focus, the OFT has secured agreement from the industry to:
The OFT recommended that HMRC and the FSA change guidance rules to ensure the new standards are met, with the threat of regulatory action if banks and building societies fail. Firms that delay transfers will have to compensate savers to ensure they do not lose out.
Allenbridge comments:
"Obviously the commitment to faster transfers and greater transparency on interest rates will be welcomed by savers, although the target of 15 working days (three weeks) is hardly speedy in this electronic age. But why has it taken a Super Complaint to drag the banks and building societies into this small improvement? And why have they been given until spring 2012 – nearly two years – to do something as simple as inform savers of the rates they get? We are also disappointed that the OFT found nothing wrong in the practice of offering high introductory rates as a come-on, and then reducing them substantially. This is confusion marketing, and fails to treat the customer fairly – if it did not benefit the banks and building societies, they would not do it."
Media enquiries
Contact Details:
Kate Davidson, Public Relations and Media Manager at Allenbridge Group PLC.
Mob: +44 (0)78 1462 4161
Tel: +44 (0)20 7409 1111
Kate.davidson@allenbridge.co.uk
http://www.allenbridge.co.uk/
Anthony Yadgaroff, Managing Director at Allenbridge Group PLC.
Tel: +44 (0)20 7409 1111
Anthony.yadgaroff@allenbridge.co.uk
Notes to Editors:
Allenbridge Group PLC is a rare beast in the investment jungle, a Mayfair-based discount broker that also advises large FTSE corporate pension funds and global banks. Founded in 1985, it carries out specialist research and consultancy, analysing investment manager performance across a wide range of funds: Unit Trusts, Investment Trusts, Venture Capital Trusts, Enterprise Investment Schemes, Charities, Hedge Funds, Funds of Hedge Funds and institutional Pension Funds.
In addition to providing comprehensive advice and strategic investment consultancy to leading institutions, Allenbridge also offers monitoring services, valuations and its specialised AllenbridgeCare service to individual investors on investment products and tax-shelter vehicles.
Allenbridge’s private investor division serves over 14,000 clients; retail and institutional funds under advisement exceed £25 billion.