Bereaved savers robbed of vital Isa tax breaks
HUNDREDS of thousands of bereaved savers are in danger of missing out on a vital new tax break because banks are making it extremely difficult to claim.
A Money Mail investigation found grieving savers are routinely being given the runaround when they try to transfer their spouse’s Isa into their own name.
Widows, widowers and bereaved civil partners were given the right to inherit Isas under rules launched two years ago.
It means if your partner had, say, £25,000 in their Isa, you could put this additional amount into an Isa in your own name and pay no tax on the returns.
The extra comes on top of your usual Isa allowance — £20,000 for this tax year — and means couples benefit from tax planning they had set in place during their marriage.
However, Money Mail has received a stream of letters from elderly savers who’ve battled for up to five months for the tax break — only to be forced to pay for a solicitor to sort out the mess.
Our probe found staff in major High Street banks are so poorly trained that they had no idea the Isa inheritance rules even existed.
Some gave out incorrect advice and none offered condolences. Others, including Post Office and Leeds BS — the fifth largest building society — don’t offer accounts where you can inherit the allowance.
Other banks are forcing customers, some in their 80s, to trudge into town centres for appointments, rather than letting them open accounts by phone or post. Savers have to tackle baffling forms too.
Bungling banks are sometimes failing to transfer Isa cash or moving it into the wrong accounts entirely.
HM Revenue & Customs says it has no idea how many people have opened inherited Isas — officially called the ‘ additional permitted allowance’ — but says more than 150,000 are entitled to it.
Claire Davis, director at Solicitors for the Elderly, says: ‘ Savers looking to use their inherited Isa allowance are very vulnerable. The forms are too complex and a lot of people can’t cope with them.
‘Banks do not seem to have their systems in order. Each branch has its own procedure and while head office might know about it, not all branch staff do.’ Widow Lynda Mason has faced a torturous ordeal to transfer her late husband’s Isas. Rodney, a retired civil engineer, died aged 71 in May last year after a 12-month battle with cancer.
She set about moving the money in his cash Isas, with five different providers, into accounts in her own name. Lynda told each bank about his death and with some of them the service was fairly good, but dealing with others involved numerous visits to branches. After five exasperating months, she gave up and handed the job over to a probate specialist.
Retired school librarian, Lynda, 68, from London, says: ‘It was very distressing at a time when you are vulnerable. I had to make appointments in branches and the staff did not seem to know what was going on. At one point I thought, why bother? But I did not want to lose the Isa wrapper. I have savings and if rates go up, I could end up paying tax on interest from my husband’s Isa money.’
Nicholas Tomkins, 50, contacted Money Mail on behalf of his 82-year old father, Rodney, who, widowed after more than 50 years of marriage, had become exasperated with HSBC’s inability to deal with his extra Isa allowance.
His wife, Margaret, passed away in March.
Nicholas says: ‘My father is very fed up. Despite numerous branch visits, phone messages and correspondence and providing all the paperwork and forms requested by the bank, we are still waiting.’ Rodney received a letter dated May 8 saying there was not enough money in his current account to fund his Isa. This was because HSBC had not moved the cash from his late wife’s Isa.
Since Money Mail intervened last week, HSBC has contacted Mr Tomkins and paid him £200 as a gesture of goodwill.
An HSBC spokesman says: ‘Our procedures are aligned with HMRC regulations. We are sorry for any confusion and have apologised to Mr Tomkins.’
When Money Mail visited branches of the large Isa providers, NatWest suggested taking out an ordinary Isa and offered a printout listing a deal that had been withdrawn several weeks earlier.
Had our reporter applied without the right forms, she would have lost out on the extra allowance. A NatWest spokesman says its bereavement team should have made us aware of this.
HSBC at first said it did not offer the deals, but the cashier checked her computer and then said they were only available to Premier current account customers. It was later confirmed this was incorrect, as all the bank’s customers are eligible. A HSBC spokesman says: ‘It is disappointing to hear of your experience. We will address any training issues.’
At Santander, an assistant printed out the forms but gave no instructions. A spokesman says: ‘As a result of your experience we are reviewing our processes and taking immediate steps to provide additional information to our branch colleagues. We would like to thank you for bringing this to our attention.’
Nationwide, Barclays, Lloyds and Halifax said we had to make an appointment in branch.
A Nationwide spokesman says: ‘The account-opening process is subtly different to other accounts. We offer appointments to provide the correct information due to the complexities of the product.’
A Lloyds Banking Group spokesman says: ‘ We continue to work hard to ensure we provide the best possible support for any customers experiencing bereavement. They can complete a request to transfer the inherited Isa allowance at a branch with a specially trained bereavement advisor. We are planning further training for our colleagues on Inherited Isas.’ sy.morris@dailymail.co.uk