Shawbrook didn’t transfer my cash Isa and paid just 0.1% interest – has it taken advantage of me?

I had a fixed rate Isa which matured with Shawbrook Bank earlier this month. 

I chose to transfer to another provider and went through the usual transfer process, giving Shawbrook more than three weeks’ notice to make the transfer on time.

Essentially, I wanted the money to land in the other account as soon as my fix with Shawbrook finished. 

However, Shawbrook chose not to process the transfer until after my account matured. 

I then discovered my cash was earning just 0.1 per cent interest. I contacted it again and it said it had up to 15 working days (three weeks) to make the transfer. 

It said this was within the FCA guidelines. Nothing I said on the phone would speed up the transfer or increase the rate it was paying on my funds.

Big banks have a poor customer service reputation but when I transferred from Halifax several years ago they transferred promptly and even paid a decent interest rate on the day or so they held onto my funds.

Do you think this is taking advantage of captive Isa customers who have no choice if they want to keep their tax free status? 

The sum involved is not massive in my case, but I am angry with the principle of the matter, especially when interest rates are so much higher now. S.C, via email

Harvey Dorset of This is Money replies: When transferring an Isa, account holders have a choice of requesting a transfer before their maturity date, thus incurring a penalty fee, or waiting until the date that your Isa matures before transferring to a new provider.

The reasons for transferring an Isa might vary, but often it will be a case of moving somewhere that your money will make a better return, within the tax-free wrapper that Isas offer.

In general, it is worth shopping around for the best cash Isa deal, so that your savings can make you as much return as possible, without you having to do any heavy lifting.

When transferring, it is important to be mindful of the rules in place so that you don’t incur that penalty.

On the other hand, transferring to a provider is a process that account holders will want to be completed as soon as possible, so that they can make the most of the benefits that Isas offer.

In your case though, you were aware of the 15-day period that providers have to transfer your Isa, and as a result requested the transfer three weeks in advance so that your Isa could be transferred immediately upon the maturity of the account.

The problem here, is that if an Isa provider begins the transfer in advance of maturity, it could be completed ahead of that date, leading to a breakage charge.

While the loss made during the transfer period on 0.1 per cent interest is hard to take, it would have been a noticeably more bitter pill to swallow had you been made to pay a penalty.

A Shawbrook spokesman said: ‘The Isa transfer process begins on the day the Isa matures, ensuring any exit fees are avoided, and all providers are obliged to complete the transfer within 15 working days. 

‘We completed the transfer well within this time frame for SC.’

Minefield: Anna Bowes says it is wise to do your research beforehand to avoid being stung when you transfer

Anna Bowes, co-founder of SavingsChampion replies: While maturing fixed rate cash Isas can be transferred before maturity, this will not usually happen, even if the application is sent in advance, unless specifically requested by the policyholder, as it’s likely to trigger an early access charge by the existing provider, which could be pretty hefty. 

For example, early exit penalties can range from around from around 90 days loss of interest for a one-year Isa to 365 days for a five-year Isa, although there is no standard charge, so this is something to check when opening a fixed term Isa.

As a result, the transfer process and the regulatory timescales will normally start when the old Isa matures.

And the customer should still be earning some interest while the transfer is progressing, but this will depend on the existing and new provider. 

Some providers will move funds into a maturity account while waiting for the funds to be moved, but the interest rate will vary, so it’s worth checking this. 

And some providers, such as Nationwide, will pay interest from the moment they receive a transfer application, even before the money has been received – so you could end up earning two lots of interest.

As seems to be the case with Isa rules and regulations, it can be a minefield so unless you have the full picture, you could end up disappointed and not earning the interest you expect.

James Blower, founder of The Savings Guru, replies: The reason is Shawbrook’s not fully in control of the process – so if it initiates the transfer straight away and then the new provider requests the funds before maturity, the customer will incur a breakage penalty.

I understand what your reader is trying to achieve here but Shawbrook are damned if they do and damned if they don’t.

Your reader is angry that they haven’t done it straight away and that he’s had a few days interest at 0.1 per cent, but he’d also be angry if they had initiated it straight away and the new provider took the funds on day 13 causing him/her a breakage penalty. They’d then be saying ‘why didn’t you wait’.