The Problems with the Post Office

[TrueBlueTerrier]

Another institution has apologised for failing to deliver

http://www.timesonline.co.uk/tol/money/ ... 212310.ece

Readers have been inundating my Question of Money column with complaints about how long the Post Office is taking to open accounts. In some cases, their money has “vanished” for as long as two months before their account is opened, causing extreme frustration and worry.

Poh Naidu waited 84 days to get the documentation on the £35,000 she had invested in her account. Nick Rowntree has waited 60 days — and at time of writing still has nothing to show for his £35,000.

Norman Leater, meanwhile, waited for just over two months until — fed up with the bruises from “banging his head against a brick wall” — he wrote to the Question of Money column as a last resort.

The Post Office has fallen into the usual trap of launching super-competitive products, only to find that it cannot cope with the resulting flood of applications — leaving savers in the dark.

In some respects, the Post Office can congratulate itself on its tie-up with the Bank of Ireland, its financial partner in UK retail savings products.

The partnership began in July 2004, and in the past few years it has launched a series of excellent products.

In particular, its Instant Saver Account, launched in April 2006; its Growth Bond 6a, launched in June this year; and Growth Bond 7, offered at the start of last month, have attracted savers in droves.

Growth Bond 6a offered a rate of 7.05% fixed for one year — a mouth-watering rate at the time, and now even more so. Growth Bond 7, offering a one-year fixed rate of 6.85%, proved even more popular. It was launched 10 days after the Irish government’s announcement that it would back 100% of all deposits in a number of the country’s banks, including Bank of Ireland.

Bond 7 had to be withdrawn from sale less than a fortnight later. The Post Office refuses to say how much money it attracted for reasons of commercial confidence, but one can assume it was huge.

While the products are sold through the Post Office’s still-extensive branch network, all processing of the applications has been done through Bank of Ireland’s back offices spread between Ireland, the UK and India.

An indication of just how big the demand was for the two Growth Bonds (and how ill-prepared Bank of Ireland was, initially, to deal with it) is the fact that Bank of Ireland has had to increase the number of staff dealing with applications by four times from July to today.

The fact that admin has been done at such arm’s length has caused both confusion and dismay among frustrated applicants. Leater, for instance, was eventually told his application was being held up due to problems over establishing his identity. “This seemed so odd to me. I handed in my application at my local office where I am well-known — the postmaster lives just two doors away from me.”

Leater’s address was mistyped in the original admin work, which meant he failed the automatic checking against his credit record.

The key thing was that investors were not told what was happening, nor where their very substantial sums of money were. “I kept being told not to worry” said Leater. “I half believed them, but my wife was very worried on my behalf.”

Naidu, of Debenham, Suffolk, had handed over a cheque for £35,000 to her local branch on July 24, and it was cashed four days later. She took to phoning up weekly to ask about progress, but despite being told staff could “see her application on the screens and it was being processed”, it took until October 21 for her to receive the documentation.

“I spoke to the head of complaints, and the company did redeem itself slightly by apologising fully and accepting all blame,” she said.

“While the Post Office’s rates have been good, it does put you off investing any more money with them. I have had almost three months of worry.”

The Post Office has, to be fair, acted promptly and unequivocally in establishing proper ground rules for those whose applications have been delayed.

It has probably learned from the mess Barclays made earlier this year, when it stated that applicants would only receive back-dated interest from 14 days after they made their application for a cash Isa. Instead, the Post Office has made it clear that it will pay the appropriate rate from the moment it received the deposits, regardless of how long it took to open the account.

Customers with one-year bonds then have a choice of redeeming their bond either 12 months after they applied, or waiting until 12 months after their bond was actually opened. Given the way interest rates have moved since the summer, the latter route may well prove the bargain of the century. For people like Naidu, it could mean up to three months’ worth of interest next year still at the fixed rate of 7.05%.

The Sunday Times now has on its desk an extensive and no doubt heartfelt apology from the Post Office’s director of savings and investments, Richard Norman.

No-one can argue that the Post Office products offered were bad value, but as my mailbag has shown, there are many who have suffered worry, anxiety and stress. Good rates do not necessarily make up for that.

The Post Office is not the first to learn that lesson, and won’t be the last. Nationwide has had to go to the lengths of refusing to accept any new Isa transfers as its backlog had grown to totally unmanageable proportions.

This suspension, issued in July, has still not been rescinded and is unlikely to be until the new year.