NatWest Misled Customer on ISA Transfer, Resulting in Compensation

A NatWest customer was wrongly advised by bank staff that they would need to close their fixed-rate cash ISA and pay a penalty to transfer the funds to another provider. The customer contacted NatWest in early August regarding a two-year fixed-rate cash ISA maturing in November 2027, expressing interest in transferring it.

Two NatWest employees reportedly told the customer that it was not possible to transfer a fixed-rate account before its maturity date. They advised that the only option would be to close the account, incur a penalty, and then reinvest the funds in a new ISA. The customer questioned this advice, fearing the loss of the tax-free status of their savings, but was informed it was a new rule designed to prevent frequent ISA transfers.

Upon researching government guidelines, the customer found no evidence supporting this claim. The bank's online bot, however, provided more accurate information, confirming that a seamless transfer was possible, though early access penalties might apply.

Following an inquiry by Sally Hamilton of Money Mail, NatWest acknowledged the misinformation. A spokesperson for the bank stated, "We sincerely apologize for the incorrect information that was provided." The bank admitted it had "fallen short of the high standards of service that we set for ourselves and that our customers rightly expect."

To rectify the error, NatWest allowed the customer to transfer their funds to an easy-access cash ISA without penalties. This prevented the customer from incurring a three-month interest penalty of £639 and, crucially, preserved the tax-free status of their nearly £65,000 in savings. Had the customer followed the initial incorrect advice and closed the account, they would have lost the tax-free benefits and been restricted to depositing only the annual ISA allowance of £20,000 into a new account.