Mis-sold Individual Savings Account (ISA)

| Investments

If you’ve lost money from an ISA, you might be able to claim compensation through our service.

What are Mis-sold ISAs?

When an Individual Savings Account is mis-sold, it is sold without disclosing all of the information you need to make the right decision for you. That includes the different types of ISAs that exist, as well as their benefits and risks.

There is no right decision in general. Every investment decision is individual and depends on a number of financial and general life factors which your ISA provider should have asked you about prior to suggesting you put your money towards an ISA.

The question remains – what type of ISA did they recommend and why?

What Are the Benefits of Different Types of ISAs?

There are four types of Individual Savings Accounts in the UK:

  • Cash ISAs
  • Stocks and Shares ISAs
  • innovative finance ISAs
  • Lifetime ISAs

To support the idea that ISAs can be a good investment in your future, it’s worth noting that you are exempt from paying interest on cash in an ISA as well as income or capital gains tax from ISA investments.

These different types of ISAs all have their own benefits, and you might not be eligible for all of them. For more information on each, we recommend you visit GOV.UK as a reliable source.

For the time being, we’ll focus on the two types that may cause the most confusion when it comes to mis-sold ISAs.

Cash ISAs

With a Cash ISA, you simply put cash into your savings account – tax free.

There are limits, of course. These vary each year. For 2021/2022, the current ISA limit is £20,000. 

However, this limit includes all types of ISAs. This means that you can only put £20,000 in all your ISAs combined, in any ratio you like. For example, you can put £10,000 towards your Cash ISA and £10,000 towards your Stocks and Shares ISA.

Stocks and Shares ISAs

In the case of Stocks and Shares ISAs, you invest in an array of shares, funds, investment trusts, and bonds rather than saving actual money.

As is the case with Cash ISAs, the money you invest in a Stocks and Shares ISA is exempt from taxation. 

The Unspoken Risks of Stocks and Shares ISAs

A common way ISAs are mis-sold is by not fully disclosing the risks that come with them. The risks, as one might expect, are much higher when it comes to Stocks and Shares ISAs. One factor is the volatility of the stock market, while the other are tax law changes. In addition, there is always the risk of hidden fees. 

Let’s dive a bit deeper into each.

The stock market is volatile. As the value of your stocks or shares grows or falls, your savings amount also shifts. So, you may end up with less money than you invested.

This might not be caused only by the nature of the stock market. Tax rules can change, and these might affect the benefits you can accrue.

Hidden Fees Associated with Stocks and Shares ISAs

Buying funds and stocks may come with many, sometimes hidden, fees. Has your ISA provider mentioned any of the following to you?

  • Account and platform fees – for maintaining the online platform you choose to manage your investments.
  • Fund management charges – what you pay fund managers to look after your investments.
  • Buying and selling charges – this is especially relevant since you’re entirely capable of doing with your investments whatever you like: withdrawing them, reinvesting, buying new stocks and shares, selling old ones, etc. But beware of trading fees (either in the form of a flat fee or a percentage).
  • Transfer out fees – the fees you pay if you transfer to another provider.

Depending on your provider, there might also be exit fees which you pay when selling your investments.

What Happens to my ISA in the Event of my Death?

If you pass away your ISA provider has two options:

  1. Sell your investments and give the proceeds to the beneficiary or administrator of your estate.
  2. Transfer those investments to your spouse’s or civil partner’s ISA, if they are still living. However, this is under the condition that both of you have the same ISA provider.

Should those investments, particularly in the case of Stocks and Shares ISAs, have to be sold in order to be given to your spouse or civil partner, you might suffer some financial losses.

All of these issues are worth thinking about. Investing of any type also implies investing in the future of our loved ones, not only our own.

Have You Been Mis-Sold an ISA?

If your ISA provider hasn’t been completely honest with you or thorough when asking you about your experience with investing and savings, you might have been the victim of a mis-sold ISA. They should have also been completely sure that you fully understood the consequences of your decision to put your money in any type of ISA, and the benefits and risks of each.

Before you had committed to a Stocks and Shares ISA, you should have been made aware of or asked questions on the following:

  • The differences between the different types of ISAs
  • The risks and benefits involved in each
  • Your risk-aversiveness and experience in investing
  • Your long-term financial plans
  • The benefits of having an emergency savings fund due to the unpredictability of Stocks and Shares ISAs
  • The amount of money you deem necessary to support yourself, your partner and/or your family
  • Your debts, investments, and other pensions
  • And many other criteria.

How Do I Get Compensation for a Mis-Sold ISA?

At Return My Money, we aim to provide you with the information and justice you deserve if you have been mis-sold an ISA, final salary pension transfer, or a SIPP (Self-Invested Personal Pension).

We operate on a no win, no fee basis. This means there are no upfront fees to begin your claim and you won’t pay us anything if we aren’t successful. You can stake your claim risk-free.

Contact our pension experts now to reclaim your money or simply get fully informed!

Mis-Sold ISA Claims FAQs

You can contact the Return My Money team of pension experts and check if you’re eligible to make a claim on a mis-sold ISA. Simply fill out our claims form and we’ll get back to you if we think you have been mis-sold an ISA. We work on a no win – no fee basis, so there’s no need to worry about up front payments.

Investing in a Stocks and Shares ISA may cause you to lose money, much like investing in stocks and shares under other circumstances can. This is most often due to changes in the stock market, but may also be caused by other factors that you cannot influence. Therefore, investing in a Stocks and Shares ISA can prove to be a bigger risk that some are ready to undertake.

Stocks and shares ISAs are the most frequently mis-sold type of ISA due to the many risks that come with investing in stocks and shares, the volatility of the stock market, changes in laws and regulations, and possible hidden fees that may come with this type of investment.

You might have been mis-sold an ISA if your financial adviser has neglected to explain to you the difference between the different types of ISAs, the risks and benefits associated with each of them, if they haven’t taken into account your risk-aversiveness and experience in investing, your long-term financial plans, your debts, investments and other pensions, and any other financial factors that might have impacted your decision to put your money in an individual savings account of any type, but especially a Stocks and Shares ISA.