Nationwide’s outrageous £1,259 bill for closing Isa 16 days early
And why it could happen to you
NATIONWIDE has hit a pensioner with a £1,259 bill for unwittingly closing his Isa two weeks early.
John Thornton, 72, received a letter from the building society in March telling him that his four-year Isa was ending.
The document confirmed the final balance was £48,795 and offered him a new deal fixed at 0.85 pc for two years.
The retired engineer, who lives in Cheltenham, Gloucestershire, found a better rate of 1.24 pc from Yorkshire Building Society and went into one of its branches to get his cash transferred across.
A few weeks later, John checked the balance of his new Isa and found that £1,259 was missing.
He demanded an explanation from the nearest Nationwide branch and was told he’d been charged an exit penalty because he had closed the account 16 days before the maturity date.
John says he had no idea that he was closing his account early. And when he complained in writing, the building society admitted its maturity letter contained no mention of the charge. John says the letter also failed to spell out the maturity date.
Yet Nationwide refused to refund his cash, arguing that the fee was listed in the original terms and conditions John had received four years previously.
The penalty, equivalent to 320 days of interest at the 2.95 pc rate he was earning, was refunded only after Money Mail intervened.
The case raises the prospect that other savers are being hit with hidden penalties as they transfer their Isas at the end of fixed terms. Some may never realise the money has been deducted, experts say.
Anna Bowes, director of the Savings Champion website, says: ‘ Banks and building societies absolutely must make sure that customers know the maturity date on their account, and warn them of any fees that apply.
‘The watchdog should look at forcing providers to make these warnings clearer so that customers aren’t hit if they make a genuine mistake.’
Millions of savers opt for fixed-term savings accounts because they tend to offer a slightly better return than easy-access deals.
Fixed bonds are particularly popular with pensioners who live on fixed incomes in retirement.
Under banking rules, banks and building societies must allow customers to access fixed-rate Isas at any time. However, there is nothing to stop firms deducting interest if you cash in before the end of the term.
Banks and building societies are always required by the Financial Conduct Authority (FCA) to write to customers before their Isa matures, providing them with a final value. But, crucially, this letter does not have to warn the customer about penalties that apply for any early withdrawals.
John took his letter to mean that his Isa term was complete and he was free to move his savings.
‘I was in complete shock when I found out how much they had taken off,’ he says.
‘It’s an incredible amount of money, and now that my wife and I are no longer working, we cannot hope to replace those losses.
‘Obviously, if I had known that there were still 16 days left until the account matured, I would not have moved the money.’
John was also disappointed by Nationwide’s response to his complaint.
The letter he was sent, which was signed by a senior complaints ha n d l e r, states: ‘I’ve checked the information that is sent to our members before maturity, and whilst I agree that the letter doesn’t explain there will be a penalty on closure, this information is in the original terms and conditions of the account. ‘Unfortunately, we cannot refund the penalty as this was correctly applied to the account closure.’ John says he had not looked at the original T&Cs for four years and had no recollection of either the size of the fee or the exact maturity date. Nationwide says John was sent a form with his maturity letter, which noted the Isa’s maturity date. ‘Nationwide’s attitude was that it was just my hard luck,’ says John. ‘Surely they could see this was an honest mistake and waive the charge, given there was nothing on the maturity letter that mentioned the penalty?’ His wife Pamela, 69, worked for Cheltenham & Gloucester Building Society for 30 years before it was taken over by Lloyds Bank. She says: ‘We always used to warn customers if they faced a penalty for leaving early — and they appreciated that.
‘People expect to be able to trust building societies more than banks, but I’m appalled by the way that Nationwide has behaved.’
A spokesman for Nationwide said: ‘As part of the normal Isa transfer process, we closed Mr Thornton’s fouryear fixed-rate Isa immediately following instruction from the Yo rk s h i r e Building Society.
‘Due to the account being closed prior to maturity, this led to an early-access charge of £1,259.24.
‘Having reviewed the case and Mr Thornton’s specific circumstances, we will be refunding the full amount as a gesture of goodwill.’
The spokesman added that when a customer transfers an Isa all the communications are handled by the company which is receiving the funds.
A spokesman for the FCA says: ‘We cannot comment on individual cases. In general, firms must treat customers fairly and communicate information in a way that is clear, fair and not misleading.’