Savers 'miss out on best ISA rates'
Millions of consumers with tax-free ISAs could be missing out on the best returns available by failing to switch accounts when introductory bonuses come to an end, a consumer group said today.
Research carried out for Consumer Focus found that two thirds of people who opened an ISA that had an introductory bonus did not move to a new account once the higher interest rate ended.
One in four ISA savers did not know if their account included an introductory bonus and a third said they did not know when it expired.
The group also found that one in three of all ISA savers had had their account for more than five years, suggesting they could get a more competitive rate by switching.
There are several cash ISAs currently available that pay returns of more than 3%, with Santander leading the field with a rate of 3.5% for existing customers, but the average rate on one of the accounts is just 0.43%.
Oliver Morgans, financial services expert at Consumer Focus, said: "Around one in three of us has a cash ISA so millions of people are likely to be losing money by not switching when their bonus rate ends.
"Unfortunately it seems that banks use higher interest rates to lure customers in and then aim to cash in on their customer's inertia.
"Sadly ISA customers have to watch banks like a hawk if they are to get the best deals. With consumers getting a paltry return as low as 0.1% on some accounts, our advice to savers is to check your rate and if you are not happy, vote with your feet and switch to an ISA that pays more."
The group lodged a super-complaint with the Office of Fair Trading about the cash ISA market last year, calling for the process of switching an ISA to be made quicker and easier, as well as for pricing structures to be more transparent.
Following the complaint, banks have agreed to start printing interest rates on customers' statements and to complete ISA transfers within 15 working days.
People have just eight days left in which to use their annual ISA allowance of £10,200, up to £5,100 of which can be paid into a cash ISA, for the current tax year.
From April 5, the annual ISA allowance will increase to £10,680, of which £5,340 can be saved in a cash ISA.
The British Bankers' Association said: "Banks automatically notify customers if there are changes resulting in materially lower rates specifically so they can switch their funds.
"Banks provide a variety of savings products to suit people's needs and have no interest in keeping customers anything less than fully informed about the products they use.
"Interest rates vary depending on the amount customers have to save and the time they can afford to leave the cash untouched. As with any product or service it always pays to shop around for the deal which is best for you."
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