If you would like to seek better returns, it may be time to transfer your ISA and make your money work harder…
What is an ISA transfer?
An ISA transfer is when you move your ISA from one provider to another or you move your savings from a cash ISA to a stocks and shares ISA, or vice versa.
Should I consider a transfer?
There are several reasons to consider transferring your Stocks and Shares ISA to a different provider:
- A new provider may offer lower fees and dealing commissions
- You decide that you would like to keep all of your ISAs in one place, instead of with a range of providers
- You may be unhappy with customer service or poor online facilities.
- You want to transfer your cash ISA to a Stocks and Shares ISA
Stocks and Shares ISA Transfer Rules
All ISA providers must allow transfers out, but not all providers accept transfers in.
If you would like to switch your current or previous year’s ISA to a new provider, while keeping future tax benefits intact, you will need to arrange for a transfer rather than selling or re-investing.
If you transfer a Stocks and Shares ISA that you have paid into during the current tax year to a different provider, you must transfer the whole balance. However, for ISAs from previous years, you can choose how much to transfer.
There are two ways that you can transfer your Stocks and Shares ISA from one provider to another – either through a cash transfer or an ‘in specie’ transfer.
What is a cash transfer?
If you decide to carry out a cash transfer, your current investor will sell any investments and pass the proceeds to your new provider. Your new provider will then re-invest your money.
This type of transfer is generally quicker, but your money will be ‘out of the market’. This means that if shares go up, you may potentially miss out on some of the gains.
What is an in-specie transfer?
An ’in-specie’ transfer is the process of transferring investments without selling the underlying investment, often used in transferring managed funds or shares. It is sometimes called ‘re-registration’.
If you choose to transfer in-specie, you may make potential savings on buy and sell costs. You may also be able to remain invested in the market throughout the transfer.
Can I transfer a Stocks and Shares ISA to a Cash ISA?
From July 2014, it has been possible to transfer your Stocks and Shares ISA to a Cash ISA.
This rule change is good news for those coming up to retirement age, or who no longer want to have their money exposed to the stock market.
Can I withdraw money and open a new ISA?
Never simply withdraw your money from the investment ISA and pay it into a cash ISA, as doing so may cancel the tax-free benefits. Your money is taken out of a tax-efficient wrapper, and any deposits, into another ISA will then use some of your annual tax-efficient savings allowance. If the value of your savings that you are transferring is more than an ISA allowance, then you won’t be able to put it all back in an ISA.
What are the charges?
When transferring your ISA some providers do charge a fee (however, there are many who don’t charge). Look at your new providers and existing providers terms and conditions to find out if there will be a charge before switching.
When transferring your Stocks and Shares ISA, you will need to take the following steps-
- Shop around for the best provider – there are plenty of Stocks and Shares ISAs to choose from
- Contact your new provider or visit their website to complete a transfer form – the majority of providers will offer the option of downloading the form. You will then need to print the transfer form off and sign it before posting it to the ISA provider as they often require a ‘wet signature’.
- Watch out for exit fees – It is possible that your current provider will charge an exit fee, especially if you have decided to transfer as stock.
Why transfer to a Stocks and Shares ISA?
An ISA is an Individual Savings Account. There are several types of ISA available to suit differing needs and circumstances. For example, you may consider opening a Junior ISA on behalf of your child, or a Lifetime ISA to save towards a deposit on your first home, or to support your retirement.
A Stocks and Shares ISA can be a great way to make your money work harder. Unlike a Cash ISA that will simply pay tax-free interest on your savings, a stocks and shares ISA will aim to outgrow cash interest rates via investment growth.
Some advantages are:
- It’s an easy way to start investing – opening a Stocks and Shares ISA does not have to be intimidating. Many providers will do the hard work for you and manage your investments.
- It’s transferable – if you are unhappy with your returns or think that your fees are too high, you can transfer to a new provider with relative ease.
Always remember though, Stocks and Shares ISAs pose an element of risk as the value of investment may go down as well as up.
The total amount you may invest in an ISA for yourself is £20,000 per financial year. If you have two or more ISAs, your total contribution must not exceed £20,000. There are a few different ISA rules you will need to be aware of, so it is important to do your research beforehand.