Money helpdesk: Bank relented over bonus for Isa

READING your piece about RBS Isa bonus deals (31 January) it was as though my own story was being told. I, too, am a customer of the Broughty Ferry RBS branch and have also had a problem with my bonus interest rates.

I have more than 40,000 invested in Isas with RBS, the bulk in a "transfer in account", with this year's allowance in a separate "bonus" Isa.

On the anniversary of the larger of these, a few weeks ago, I received a letter advising me my 1.75 per cent bonus would fall to 1 per cent from 21 May, but only if I paid my Isa allowances for the year and 2010-11. But on re-reading the letter I discovered I would get no bonus between 30 January and 21 May, only the underlying 1.9 per cent rate.

I complained to the Isa savings centre and was told I was lucky to get a bonus at all. I then contacted the branch who said its hands were tied but it would contact the Isa centre. A few days later the branch came back with a revised offer of a 0.75 per cent bonus from 1 February to May 2011.

I have sympathy with the branch staff as they obviously have not been kept informed of the details of the Isa accounts. But I am still losing 0.25 per cent for a year to gain 0.75 per cent for three and a half months. I think I will be transferring my money when better rates appear.

AS, by e-mail

Michelle Slade of Moneyfacts writes:

There is no requirement by providers to advise customers when a bonus has ended, so it is pleasing to see you were contacted and given the opportunity to review your options.

Typically, when a bonus ends, the account reverts to the underlying rate. I have never before come across a bonus being re-introduced, even more so after a few months.

You would think if a bonus were to be introduced it would be straight away. I can see your frustration. While 1.9 per cent is a fall, compared with other Isas paying 0.10 per cent, it isn't so bad.

However, with Isa season starting, more competitive deals are likely, so a transfer out may deliver a better deal.

RBS has launched a new Instant Access Isa, though this would only be attractive if you have more than 50,000 to transfer across. It offers a top rate of 2.50 per cent on balances above 50,000, 2.4 per cent for between 27,000 and 49,999, 2.25 per cent for 22,000-26,000, falling to 1.45 per cent for 15,000-21,000.

However, these annual rates include a 0.5 per cent bonus fixed for a year. To qualify for the bonus, you must either invest at least your full 5,100 allowance for next year before the end of April, or transfer previous Isas across. The bonus begins to accrue in May.

If all you invest is 5,100, interest will be only 1.05 per cent including bonus. Invest less and it falls to 0.55 per cent.

So the return is much less competitive for smaller balances. But Standard Life Savings is offering 2.65 per cent on its Cash Isa Direct Access.