Banks shun new flexible ISA rules
The majority of banks and building societies are ignoring new flexible ISA rules which were introduced in April, an investigation has revealed.
Under the flexible ISA rules that came into effect on 6 April 2016, you can withdraw and replace your savings within the same tax year without losing the full ISA benefits.
As an example, if you deposit the maximum £15,240 and later make a withdrawal, you are allowed to contribute to your ISA again within the same tax year.
Stocks and shares ISA providers can also allow this facility if the flexible options are made via a cash trading account.
But a Which? investigation has found that most ISA providers are keeping the old rules in place, so you won’t necessarily be able to make further deposits following a withdrawal.
It looked at 57 cash ISA providers and of those, 40 didn’t offer ISA flexibility at all.
And the list includes big names such as HSBC, RBS and Santander. It also found that very few building societies have embraced the new rules, with the exception of Nationwide, Newcastle, Skipton and Principality.
Yorkshire Building Society group told Which? it plans to allow flexible withdrawals on some accounts during the second half of 2016.
For those hoping for flexible stocks and shares ISAs, they are currently not available at 11 of the 12 providers Which? asked: AJ Bell, Danske Bank, Fidelity, Hargreaves Lansdown, HSBC, Lloyds Banking Group, M&S Bank, Nutmeg, RBS, Tilney Bestinvest and Virgin Money.
Only The Share Centre said its entire ISA range is flexible.
Many ISA providers are also yet to adopt new rules on inheriting ISAs. Under the old system, ISA accounts automatically lost their tax-free status when the account holder died.
But now the survivor can receive an increased allowance equal to the value of their late husband’s, wives or civil partner’s ISA value which they could ‘top up’ with the value passed to them on death.
As an example, at the time of death (must be on or after 3 December 2014), if your spouse had saved £20,000 in their ISA, in addition to your individual limit of £15,240, you’d also get a separate one-off £20,000 ISA allowance for that tax year.
However, as with ISA flexibility, it’s not compulsory for providers to comply with the new rules.
The table below shows which banks and building societies offer the new ISA rules:
AA Savings, Al Rayan Bank, the Post Office and Shawbrook Bank are among the providers that don’t currently accept an Additional Permitted Subscription (APS), along with most building societies (Buckinghamshire, Cambridge, Furness, Hanley, Harpenden, Hinckley & Rugby, Leeds, Manchester, Mansfield, Marsden, Melton Mowbray and Saffron).
Aldermore said it reviews this on a “case-by-case basis.”
And of the ISA providers that will accept an APS, some will only do so if the deceased ISA holder was a customer (Co-op, Smile and Britannia; Tesco Bank; Coventry and Ipswich building societies).
Others ask beneficiaries to open an inheritance ISA solely for this purpose. If you’re in any doubt, ask your Isa provider whether or not it applies these rules.
See YourMoney.com’s ISAs: your back-to-basics guide for 2016.