10 things you should know about ISA transfers
Investing or saving into an Individual Savings Account (ISA) is a simple way to boost your earnings as tax-efficiently as possible. There are rules, however, that you need to bear in mind in order to protect your ISA’s tax-efficient status. One area in which special care should be taken relates to transfers. This post explains why, and answers some of the most common questions about transferring ISAs between providers.
Please remember, tax rules can change and the impact of taxation depends on your circumstances and where you live.
When you want to transfer your ISA from one provider to another, there are certain rules you need to know about. Your financial adviser will be able to explain these in greater detail, so if you haven’t transferred an ISA or Junior ISA between providers before, it makes sense to speak with them before you take any action.
In the meantime, here are 10 things everyone might need to know about ISA transfers, to offer some food for thought. Please remember however, the views expressed throughout this article should not be taken as a recommendation, advice or forecast.
1. What is an ISA transfer?
An ISA transfer is a process that lets you move money you’ve built up in your ISAs over previous tax years to a new provider and keep its tax-efficient status. Transferring an ISA can be a smart move if you’ve found a better deal with a different provider. This might be because of a better interest rate, lower fees or a product that is better aligned with your personal circumstances or financial goals.
2. How do ISA transfers work?
Transferring an ISA or Junior ISA for example, from one provider to another, might sound like a lot of work. But it’s actually a relatively simple process. Once you or your adviser give your new provider your transfer instruction, they do the hard work for you, contacting your existing provider and managing the transfer on your behalf.
There’s no limit to the number of ISAs or Junior ISAs you can transfer between providers, and you can transfer them at any time. You can choose to transfer your ISA in its entirety, or just a portion of it, regardless of the tax year it was paid in.
It’s important to remember that your current provider may apply a charge when you transfer your investment and also that, whilst your investment is being transferred, it will be out of the market for a short period of time and will not lose or gain in value.
3. Will a transfer affect my ISA allowance for this year?
No, your current ISA allowance will not be affected by any ISAs you transfer between providers.
4. How long will it take to transfer an ISA?
This will naturally vary between providers, but the transfers between Cash ISAs should take no longer than 15 working days and for other types of ISA transfers shouldn’t take longer than 30 days.
5. How much will it cost me?
If there are any charges to transfer your ISA, they will differ among providers. It’s always worth you or your adviser checking with both your current and your future ISA provider to find out if there are any fees or penalties you’ll need to pay if you transfer.
6. Is there a limit on the value of ISAs I want to transfer?
The answer here is there may be. Limits will naturally vary between providers, and you or your adviser should check with them for any minimum or maximum ISA transfer levels before taking any action.
7. Can I transfer a Stocks and Shares ISA into a Cash ISA and vice versa?
Yes, absolutely. It’s important to be aware that there are differences between the two ISA types in terms of risk to your money and charges, so you and your adviser will need to make sure the transfer is right for you before you take any action.
8. What if I want to transfer a Lifetime ISA to a different type of ISA?
If you want to transfer a Lifetime ISA to a different type of ISA and you’re under 60 years old, you will have to pay a withdrawal fee of 25%.
9. How will fees affect my new ISA?
With all ISA providers there will be certain fees to pay, like ongoing charges for example. The level of these charges will be different depending on whether you have a Stocks and Shares ISA or a Cash ISA. So please bear in mind that all charges will have the effect of reducing the amount you get back from your investment. There may also be lock-in periods (for example a period of two years), platform fees and withdrawal fees to be aware of before you make your transfer decision, but your adviser will be able to help you understand any charges and fees that will apply.
10. Is transferring an ISA right for me?
It’s important not to presume that moving your ISA to a new provider will result in better financial returns. The performance of any stocks and shares ISA will be determined by the portfolios, funds or stocks you invest your money in, not the provider. For cash ISAs, the performance will likely be determined by the interest paid. But your financial adviser will be able to explain more about your options and help you decide the course of action that’s right for you.
The value of stocks and shares investments can go down as well as up so you might not get back the amount you put in.
To find out if transferring an ISA is right for your situation and financial plans, we recommend you speak to your financial adviser.
