Money stuck in high interest account

[Zaphyre]

Hi,

 

In November 2010 my mother sold her home for £124,000. In January 2011 she went to Barclays Bank to ask if some could be put into a high interest account. She was advised on what would be a good amount to put away and how much to keep and it was all set up for her. So £80,000 was put into a high interest account for 3 years. In the terms and conditions it states that no money can be withdrawn in that time. So she can't withdraw money from that account until January 2014. She is now running out of money to pay her rent. She has a flat with a Housing Association. She can't claim any benefits as she has the £80,000 and doesn't work due to ill health so she has no income other than the interest this £80,000 is making each month which nowhere near covers her rent. What can she do? If she can't get this money she will not be able to pay her rent, bills or eat. Has anyone been in a similar situation or have any advise, I would be ever so grateful.

 

Thankyou

[renegadeimp]

Could contact the bank and see what the penalty would be for closing down the account.

[Zaphyre]

Thanks for your reply. We have been in 4 times now, they said there is no penalty as they will not allow her to access the money. Only if she dies or goes bankrupt

[renegadeimp]

Then tell them you want the account closed and the entire amount withdrawn and deposited into your mothers account. I know that some banks have policies, but they only exist because the bank will be making massive profits on the money, whilst only giving out maybe 3-4% interest.

 

They will be using the money to loan to other people/companies and charging them a much higher interest rate, so of course they dont want the money to be removed.

 

Can i ask, is it a savings account, a bond account or a fixed or variable rate ISA account? Could it also be the nefarious investment savings account?

[Zaphyre]

Its a monthly savings bond account. They have told us we are not able to close the account.

[renegadeimp]

Ahh im guessing its a fixed rate one?

[Zaphyre]

Yes it is

[slick132]

Hi Zaphyre,

 

I think the bank are talking nonsense.

 

I'm certain you can close the a/c but YM will probably receive little or no interest.

 

As a consequence, YM may be penalised in respect of any interest that has been paid out so far.

 

You should put the instruction to close the Bond in writing and give them 7 days to comply, in view of the delays caused so far. Send by Rec'd Del'y so you have proof of postage.

 

You say YM was "advised" to open the Bond. If this was advice from the bank, then a Bond which allows no access or withdrawals may have been inappropriate unless YOU confirmed the money would not be needed in the 3 years.

 

If YM received poor advice, then you may have an argument that she should NOT be penalised for the closure. However, this may be a tough won to win and you may have to negotiate an agreement with the bank. It may be that they'd agree to pay interest based on a normal deposit a/c which will obviously be at a lower int't rate.

 

[slick132]

Also, you should check carefully through the T&C's governing the Bond, to see what is said about early closure.

 

[Zaphyre]

Thankyou. I will tell her to do that! I have been looking on the internet at fixed rate saving bonds with Barclays and it does state no early withdrawals! She really didn't understand what she was getting herself into with this Harsh lesson. However, I will tell her to write to them asking them to close the account down as you suggest, it is definitely worth a try.

 

Thankyou

[Zaphyre]

We have looked, it clearly says no early withdrawals unless you die or go bankrupt

[renegadeimp]

It says no withdrawels. Not no closure of account. You have to remember, they are two completely different things.

[slick132]

As Renegadeimp says, withdrawals and closure are hugely different.

 

She really didn't understand what she was getting herself into with this

 

All the more reason to consider if YM was properly advised, with attention being paid to her short term financial needs. If she was poorly advised, you should help her fight her corner.

 

Let us know how this goes please.

 

[Zaphyre]

Yes I am going to help her fight her corner, I will write the letter for her. It does say that the deposit must remain in the account from the time it is opened to the time of maturity, but I will definitely be asking them to close her account. Thankyou I will let you know how it goes

[renegadeimp]

Yes it says that, but thats only in regards to withdrawal. They cannot tell you that the money must stay in there simply because the bank says so.

[Zaphyre]

That gives us a lot of hope, thankyou so much

[Zaphyre]

Hi,

 

Just to update you. We sent a letter to ask them to close the account and let us know what the penalty will be and they replied saying they will not close the account

[slick132]

Hi Zaphyre,

 

So we can consider your next move, please confirm:-

 

1. Exactly what you instructed the bank to do.

 

2. Exactly how they replied.

 

If they're not treating you fairly, you may have a case for suing the bank using BCOB's - http://www.consumeractiongroup.co.uk/forum/announcement.php?f=7&a=220

 

If court action looks like your best bet, we will try to assist as far as possible. Is this something you are willing to do ?

 

[MSAR]

My parents were in that situation - placed their savings in a high interest bonds. There really wasn't anything they could do except borrow from me ... I was borrowing from them to cover my living costs thanks to PPI.

[slick132]

Thanks for the input MSAR,

 

Maybe there's something I'm not understanding..............

 

I can see that, if you need to withdraw money from a Bond which doesn't allow for it, you would be penalised by the bank and you'd NOT get the preferential rate associated with that bond.

 

However, surely if you want or have to withdraw the money, the bank cannot refuse your instruction.

 

[MSAR]

Thanks for the input MSAR,

 

Maybe there's something I'm not understanding..............

 

I can see that, if you need to withdraw money from a Bond which doesn't allow for it, you would be penalised by the bank and you'd NOT get the preferential rate associated with that bond.

 

However, surely if you want or have to withdraw the money, the bank cannot refuse your instruction.

 

 

Well, it's even tighter than that. By agreeing to a bond, you agree to let yhe bank have free reign with that money for that time. They have loaned it out to someone else at a fixed rate. Otherwise they would have had to borrow from a central bank.