Apr.04, 2010

Slow ISA transfers and the removal of introductory bonuses are costing British savers £3bn a year, according to a super complaint made to the Office of Fair Trading by Consumer Focus.

Now, I know for PR purposes a figure has to be put on everything, but £3bn? That's more than £60 for everyone in the country old enough to invest in an ISA. Looking at what passes for Consumer Focus's methodology it's along the same lines as George Osborne's "back of a fag packet" plans to pay for not slapping a penny on National Insurance. But having said this, Consumer Focus's thrust is right: the ISA market doesn't work properly at present and undoubtedly savers are losing out.

Introductory bonus rates first came into vogue about a decade ago, and from the outset their profitability was based around the premise of getting savers in, dropping the rate after six months or a year and then relying on customer inertia. Back then, the arch practitioners were the recently demutualised Northern Rock. The Rock was notorious for advertising top rates, grabbing the cash and then slashing.

For a few years, introductory rates went out of fashion. Many customers wised up to the trick and some of the then new price comparison sites took the brave decision to shunt these types of accounts into their own special ghetto. But with interest rates so low since the credit crunch that the banks actually want customer deposits again, the introductory bonus is well and truly back. Add to this the slow transfer of money between providers. I ask you, what company would dedicate proper resources to the speedy transfer out of accounts. Last year, for instance, Nationwide was embarrassingly hauled over the coals for its dire administration. It's no coincidence, by the way, that the height of the ISA transfer problems across the industry was in 2008 the year when banking came to the brink of ruin, when everyone was scrabbling around for customer cash.

I'd like to throw in another reason for the slow transfer of ISAs between providers and account opening generally – not surprisingly, ignored by the Government-backed Consumer Focus – the UK's money-laundering rules. Try to open an account and you are instantly hit with providing a host of personal documentation, not so bad in branch but through the post it's a complete pain and probably prevents the square root of zero in terms of money laundering. In addition, as is the British way, lots of providers gold-plate the legislation. For example, I have a tiny personal equity plan with Invesco dating back many years. They were happy to accept my cash at the time but each week it seems some computer at Invesco HQ spurts out a request for me to send original proof of who I am in reaction to guess what? Yes, the good old money-laundering rules. Each week this ridiculous request ends in the shredder. It's a battle of wills between me and a faceless computer.

Strangely enough, though, the most enlightened company that I know when it comes to dealing with the money-laundering rules is National Savings and Investment, famous for its super safe savings accounts and Ernie. NS&I simply does an electoral register check on new customers, and if it comes up clear you're fine to open an account. Odd isn't it how a government organisation seemingly has discretion while the private sector is chock full of jobsworths.

Hanging on for a fairer deal

The cost of calls between different mobile networks and to connect a call to a mobile is to fall but only gradually until 2015, as explored on pages 92 and 93. It's good that, finally, Ofcom has decided that the mobile networks have been systematically ripping us off for years, and the big landline providers for that matter – particularly as the technology used in the connection of calls is a lot cheaper than it once was. But why are we having to wait four and a bit years for the full price cut? The cosy arrangement between the mobile firms which works of the premise that "I pay you and you pay me (with the customers' cash of course)" isn't being halted straight away but is being able to gradually wind down at the cost to the consumer of millions of pounds.

What's more, if the mobile firms appeal, which is apparently likely, then the change could be further delayed. No wonder the shares in the mobile networks barely moved when Ofcom's decision was announced on Thursday. I suppose Ofcom had to be aware of legal challenges and hence the idea to phase a fairer charging regime, but I can't escape the conclusion that what we have seen is yet another case of a pussy-footing regulator at work.