You are here: Home - Saving & Banking - News -

Watchdog claims Isa savers miss out on £3bn a year

Written by:
Consumer Focus is to complain to regulators that consumers with cash Individual Savings Accounts are missing out on £3bn a year in interest because of inefficient practices by providers.

Consumer Focus on Wednesday will send a “super-complaint” to the Office of Fair Trading arguing that savers were being unfairly treated by banks and building societies by “bait pricing” – the practice of offering attractive headline rates on cash Isas only to see them dramatically drop a short time later.

Isa limit could rise above £11,000 – Mar-26In depth: Personal finance – Mar-31The watchdog also claimed that consumers faced unnecessary and costly delays when transferring accounts, there was a lack of clarity on interest rates and arbitrary rules were imposed by cash Isa providers forbidding transfers into more attractive accounts.

It also found the average rates of interest on cash Isas had fallen further in the downturn than other comparable savings products, such as mortgages and branch-based instant access accounts.

”The data suggest to us that that banks have used consumer inertia and problems in transferring savings in cash Isa accounts to increase the spread they earn from old accounts,” it said.

Under the “super-complaint” procedure, the OFT has 90 days to decide whether to investigate.

Isas have been seen as a success story since their introduction by the government in 1999 as a tax shelter. It is estimated that about 19m people, a third of all adults, own at least one cash Isa and £275bn has been invested in the products. Last week’s Budget increased the allowance to £10,200 for all savers in the new tax year starting April 6.

“On average, Isa holders are getting less than 0.5 per cent in interest despite the eye-catching rates, currently in excess of three per cent, at which they are often brought to the market,” said Mike O’Connor, chief executive of Consumer Focus. “These ‘bonus’ headline savings rates usually drop after a year, often leaving savers with uncompetitive rates.”

The Isa market is dominated by the high street banks, with Lloyds Banking Group taking a 21.3 per cent market share and Santander, owner of Abbey National and Alliance & Leicester, a 14.8 per cent stake. Nationwide, the country’s largest building society, has a 14.6 per cent stake.


Tag Box

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

ISAs: your back-to-basics guide for 2018/19

Here’s everything you need to know to make the most of your unused ISA allowance ahead of the 5 April deadli...

A guide to Sharia savings accounts

A number of Sharia savings products have upped their game in recent months, beating more familiar competitors ...

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week

Read previous post:
Highlights from 24th Annual AVCJ Forum 2011

Thank you to all the sponsors, speakers and delegates that participated at the 24th annual AVCJ Forum: Asia's Private Equity...