Time to talk about ISAs

As I’m sure you’re aware, the tax year ends on 5 April, so we’re coming up to the time of year when ISAs are a key focus for us and generate a large savings inflow. We expect to attract 32.25% of our 2021 savings inflow through Cash ISAs during this ISA season. This growth is planned to come mainly from our variable rate products (77%), which provide a slightly lower interest rate but allow easy access, giving customers more flexibility than fixed rate products.

An ISA identity crisis?

The perception of ISAs has changed since the introduction of the Personal Savings Allowance in 2016. This meant that customers were no longer taxed on the interest they received on their savings, up to an annual total of £1,000 for basic rate taxpayers. The consequence of this was that in some ways, ISAs lost their USP (Unique Selling Point), which was based around their tax-free status.

However, Cash ISAs still have their place, depending on the customer’s circumstances.

The main benefits of Cash ISAs are:

• You never pay tax on them – even if you go over the £1,000 tax free limit, providing peace of mind
• You receive an allowance each year, which you can allocate to a new or existing ISA
• Cash ISAs are still especially useful for savers with large pots who have used up (or will use up) the £1,000 tax free interest limit
• If you die whilst holding an ISA, your spouse or civil partner (if you have one) is entitled to an additional ISA allowance, equal to the value of the ISA (even if they don’t inherit the funds).

The transfer market

The ISA transfer market (customers who have Cash ISAs with other providers and may benefit from moving them all to us) is a big opportunity. And one we’re definitely focussing on this quarter. There are a lot of benefits for customers to having all of their Cash ISAs in one place:

• It makes it easier to keep track of their savings
• It makes the administrative side easier – customers receive just one statement showing all their accounts in one place
• They can view them all (including any transactions and interest rates) in one place by using our savings app. More info on the app can be found here
• They may receive a better interest rate by moving their Cash ISA – especially if they have Cash ISAs where the rate has deteriorated over time
• Our transfer process is simple
• The customer can even transfer an ISA with another provider at the same time they open a new one.

Lawrence Chan, Savings Product Manager says:

‘Lots of individuals would have saved in ISAs for a number of years and are likely to have built up considerable savings, perhaps across a number of providers. Therefore, amalgamating their savings with one provider may be more efficient from both an administration perspective, and offer better returns.’  

The transfer process

The ISA transfer process is fairly straightforward as it can be completed as part of the application process and only takes 7 days (if both providers use the Cash ISA Transfer Service and there are no queries). However, for agencies currently using the telephone process due to lockdown, it’s just a simple form for customers to return, which can easily be completed in 5 minutes. The process takes just 15 days if there are no queries in this case. And the good news for the customer is that they will still receive interest from the date the funds are received for electronic transfers, or backdated to the 8^th working day from when the transfer was set up (or the date of the cheque) for manual transfers.

ISA transfer dos and don’ts

You can help us to ensure the transfer process is as quick and smooth as possible by:

• Setting up the ISA tracker as a priority, with the status ‘transfer IN request received’( for electronic), or PROCESSING TRANSFER IN REQUEST’ (for manual)- otherwise the transfer won’t progress  
• Returning the 1054 form (Cash ISA Transfer Instruction form) for manual transfers to your linked branch as soon as possible. This is sent to the customers’ ISA provider as their authorisation for the transfer.

Sally Hoggard, Operations Leader, Mortgage and Savings Service Delivery has shared two areas to look out for, which sometimes create stumbling blocks for agencies:

1. Not checking that an ISA product will accept funds before accepting the Transfer Form
2. Not inputting a specific amount (£) when selecting a partial transfer.

Talking to your customers about Cash ISAs

We recognise the current difficulties the lockdown brings with not being able to see customers face to face during ISA season. We also understand that it takes a bit more effort for agencies to open or transfer Cash ISAs over the phone, due to the requirement for the customer to return their paperwork to us.

However, we encourage you to talk to your customers at this time of year about the benefits of holding a Cash ISA, wherever appropriate, and especially the benefits of transferring Cash ISAs they hold elsewhere to us – which they can do at any time. They don’t need to wait until the start of the tax year.

Look out for the launch of the Loyalty Six Access Saver ISA on the 9^th March, only available via branch and agency.

Marketing support

We’re running a marketing campaign promoting the benefits of opening an ISA with the No.1 Savings Provider and transferring your Cash ISA. This will go live at the start of the New Tax Year. More information will follow in a Retail Brief.