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Why Transfer Your ISA?
If you have existing ISA plans and you are unhappy with the return you are getting then transferring to a new provider to get a better deal is easy.
If you have Cash ISAs then in recent years with falling interest rates, the rates of interest offered by many Cash ISA providers have tumbled. With inflation running at 3% plus over the last 2 years, there is areal danger your money is not maintaining its value in real terms.
By shopping around you can ensure that you are getting the best Cash ISA deal possible.
Transferring your cash ISAs to a new provider is straightforward and won’t cost you anything.
If you have a stocks and shares ISA you may be unhappy with the performance of the ISA or your circumstances may have changed and you may wish to transfer to an ISA provider that provides e.g. a monthly income option. Click here For more information on investment ISA transfers.
How to Transfer Your ISA:
Transferring your Cash ISA is easy and only requires a bit of your time.
1. Firstly you need to shop around for a Cash ISA deal that suits your requirements. Use our website to help find a good deal.
2. The new ISA provider should include in their application pack a “Cash ISA Transfer” form. In completing this you are authorising the new provider to do all the work in transferring your existing cash ISAs over. If you have lots of different cash ISAs with different providers this is not a problem.
3. On receipt of the completed transfer forms from you, your new ISA provider will contact your existing ISA providers and arrange the transfers. The transfer process should take no longer than 15 business working days.
4. Your new ISA provider should start paying interest from day 16 of the process regardless whether the Cash ISA transfer is completed within the standard 15 business day timescale.
5. Once the transfers have been completed your new ISA provider will confirm this to you in writing.
Top ISA Transfer Tips
- With a bit of effort you could get a much better rate of interest on your Cash ISAs. Shop around using our website and other online sites to find the best deal for you. Cash ISA rates are changing all the time so make a note of looking say every 6 months to see how your Cash ISAs are performing in relation to the market.
- If you don’t need access to your Cash ISA money consider a fixed rate or notice account deal as interest paid will often be higher.
- A number of Cash ISA providers pay bonus rates which expire after 12 months. Make sure you diarise the anniversary of your ISA if you have a bonus deal. Then transfer to a new cash ISA provider.
- If you are looking for a fixed rate cash ISA deal and you are comfortable locking money away for a set period of time e.g. 3 to 5 years then you may also wish to consider alternative to fixed rate cash isas.
- You can transfer cash ISAs into stocks and shares ISAs but not the other way round.
- Make sure you do not cash in your old ISAs in order to reinvest into a new cash ISA account. By doing this the proceeds will be classed as new money for cash ISA investment and you will lose the tax free entitlements from previous years.
- Leave the ISA transfer process to the new ISA provider. They will do the transfer work.
- If having taken out your cash ISA in the current tax year there is nothing stopping you moving it to a new provider soon afterwards if you find a better deal. However it is important you read the terms and conditions to ensure there are no interest penalties or conditions before you move your ISA. If there are penalties you may be better off staying put until the time penalties expire.
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What is an investment ISA?
An investment ISA is simply where you use your annual ISA allowance (currently £20,000 in 2019-20) to invest in non cash assets such as shares, investment trusts, open-ended investment companies (OEICs), life insurance policies, corporate bonds, and gilts.
How do I choose an investment ISA?
An investment ISA, as with all investments, involves an element of risk, so it’s important that you are comfortable with this and you are in a sufficiently stable financial position. If you are unsure you should seek independent financial advice.
Before you open an investment ISA, make sure that:
- Your debts are under control – you’ve either paid them off or have affordable arrangements in place to do so.
- You have emergency savings that you can access easily if something unexpected occurs – if your car breaks down or you’re made redundant, you’ll need savings that you can use straight away.
If you’re very new to saving and don’t yet have a basic emergency fund, you may find that a cash ISA is more suitable for you at this stage. Once you’ve built up some accessible savings in this way, you might then want to consider an investment ISA.
Investment ISA tips for 2020
- You should be prepared to invest for the medium to long term with a investment ISA – for example, for five years or more.
- If you think you might require access to your cash in the next couple of years, a investment ISA may not be the right choice for you. Share prices can be volatile – and so if you were to withdraw your investment in the next twelve to eighteen months, you could end up with less money than you started with.
- Different investment ISAs have different investment options. These range from as little as £10 per month (e.g. through a fund) to a specified minimum investment (e.g. £500).
- Some ISA providers will give you online access to your account, allowing you to see the investment performance of your ISA and keep up to date with any charges incurred.
- If your investment ISA isn’t performing as well as you’d like, you will usually be permitted to transfer it another provider. To do this, speak to your new ISA manager who will arrange the transfer, allowing you to avoid losing any tax benefits by withdrawing your cash.
- You can transfer shares you get from an HMRC-approved SAYE (save as you earn) scheme run by your employer, or a share incentive plan, into a investment component of an ISA without incurring capital gains tax, up to your annual ISA allowance.
- You will not be able to transfer any existing non-ISA shares, or shares you’ve inherited, into an investment ISA.
- With an investment ISA, there is greater long-term growth potential than a cash ISA – however, bear in mind that the value of your investment can go down as well as up.
- If you have an investment ISA from a previous tax year, you’re permitted to move this into a current investment ISA or split it between more than one investment ISA.
- If you want to open a Junior ISA (JISA) for your child, you can also invest in investment on their behalf up to a maximum of £4,368.
How does a stocks and shares ISA work?
A stocks and shares ISA acts as a tax-efficient ‘wrapper’ for your investments, allowing you invest up to a set amount per year (currently £20,000 for the 2019/20 tax year) while paying a reduced amount of tax on any investment income you make.
Your personal allowance for a stocks and shares ISA is £20,000 for the 2019/20 tax year. Investing this amount would use up your full ISA allowance, but if you prefer, you can divide your ISA allowance between a cash ISA and a stocks and shares ISA.
You could, for example, put some of your allowance in a cash ISA and the remaining balance can be invested in stocks and shares.
When considering a stocks and shares ISA, bear in mind that tax treatment may vary and is subject to change in the future.
Can I transfer a stocks and shares ISA to a new provider?
You can switch your investments within the stocks and shares ISA, or transfer your ISA to another provider without it affecting your allowance for that tax year.
To transfer a stocks and shares ISA from one provider to another, speak to the new provider, who will arrange it on your behalf.
What do I need to bear in mind when choosing a stocks and shares ISA?
Different stocks and shares ISA providers offer different levels of risk, as well as varying potential returns. Some are focused on specific types of asset, while others are more varied.
If you want the opportunity to spread your investments around different areas – and thus avoid putting all your eggs in one basket – you could choose a stocks and shares ISA provider that specializes in diverse portfolio management.
One of the key advantages of a stocks and shares ISA is that it can offer the potential to deliver higher returns than a cash ISA, especially if you plan to hold it over the long term.
Holding a stocks and shares ISA for a longer period of time increases your chances of riding out fluctuations in the market.
If you’re looking to hold your investment for at least five years, and are happy to take on a level of risk, then a stocks and shares ISA might be a suitable choice for you.
However, stocks and shares ISAs don’t provide the same level of security as cash ISAs. If you’re saving for the short term, need easy access to your money, can’t afford to risk your capital, or are simply risk-averse, then a stocks and shares ISA probably won’t be suitable for you.
As with all financial decisions, it’s best to seek independent advice if you’re unsure.
If a stocks and shares ISA isn’t the right choice for you, we also provide access to a leading range of cash ISAs.