Isas transfers lag current account switching: data

Last October the organisation standardised switching processes across participating banks and added guarantees against losses resulting from switches. Uptake of the scheme has since increased by 22%.

Barclays, Natwest, Lloyds and HSBC all shedded more than 15,000 customers, while Halifax gained more than 40,000.

By comparison, the FCA’s cash savings report noted that despite wider use of electronic transfers, consumers still perceived Isa transfers as difficult and inconvenient.

Isas do not have a standardised transfer system, and require paperwork to transfer the previous years’ balances to the new Isa.

The FCA noted that 59% of customers who switched savings accounts did so to obtain higher rates. In addition, the regulator characterised half of all switchers as “rate chasers”, who actively pursued high interest rates. Where consumers didn’t pursue better rates, it was due to their being unaware of higher rates elsewhere, or because they valued their existing relationships with their providers.

The regulator also suggested that firms perceived a polarised market “with intense competition among some firms in relation to the custom of ‘rate chasers’, compared with another part of the market characterised by high consumer inertia and limited competition”.

This encouraged banks to mothball existing customer accounts on lower rates while offering higher rates to new customers.

One unnamed consumer body complained that higher introductory rates “exploit people’s natural tendencies to discount the future in favour of the present, and are not compatible with Treating Customers Fairly”.

Adviser view: Graeme Inglis of Fife-based Create and Prosper Financial Services, warned: “The onus is very much on the consumer, as it comes to the end of a fixed period, to shop around.”

“Quite often when you look at the cost of time going from one to the other you can lose interest in the switching period. Clients should look at their cash ISAs, as rates have plummeted.”