ISA transfers explained – everything you need to know
In this article I explain how ISA transfers work and what to look out for. I also tell you how to compare the best cash ISA transfer rates. If you are looking to transfer your existing Stocks and Shares ISA I detail how to find the best Stocks and Shares ISA provider for your portfolio.
How do ISA transfers work?
Investing in an ISA is a great way of growing your savings free of income tax and capital gains tax. However, how you invest the money within the ISA wrapper can have a significant impact on your long term returns.
If your savings are held in a cash ISA then there is a wide choice of providers with a variety of interest rates on offer and it makes sense to shop around for the best ISA transfer rate deal. If your savings are in stock market linked investments (via a Stocks and Shares ISA) there is now a large number of providers who offer a range of investment options to make the management of your Stocks and Shares ISA simple and cost effective.
As the investment market is continually evolving your original choice of ISA provider, for either your cash ISA or Stocks and Shares ISA, may no longer be the best choice to meet your long term saving or investing goals. It may be that the interest rate on your cash ISA is no longer competitive (you can check our best buy tables), or your Stocks and Shares ISA provider doesn't offer the tools, research or fund range that could help improve your investment returns. If this is the case then it may make sense transfer your to another provider. Remember, inertia may increase the ISA provider's profits while diminishing your investment returns.
The good news is that an ISA transfers from one ISA provider to another is a fairly straightforward process, but there are a few things you need to bear in mind when transferring ISAs:
- You can make ISA transfers as many times as you like and this will not affect your ISA allowance in any way.
- You can transfer an ISA at any time.
- You can make ISA tranfers to a new ISA provider and open a new ISA account for the current tax year at the same time. The part of your new ISA investment relating to the current tax year must be within the annual ISA allowance (£20,000 for the 2018/19 and 2019/20 tax year).
- Never withdraw money from an ISA in order to transfer to another provider as you will lose the tax-free benefits of your investment. Instead always use the transfer service ISA providers offer to carry out the transfer. This goes for cash ISA transfers and as well as Stocks and Shares ISAs.
What are the ISA transfer rules?
Below is a roundup of the cash ISA transfer rules as well as those for Stocks and Shares ISAs:
- If your ISA has been opened in the current tax year then you must transfer the whole amount, once transferred you can top up your investment to the current ISA allowance if you want with the new ISA provider
- Cash ISA transfer in rules allow you to transfer just part of a previous tax year's cash ISA or Stocks and Shares ISA
- If you transfer ISAs from previous tax years then any amount can be transferred and it does not impact your current tax year's ISA allowance.
- ISA transfers can be made from a cash ISA to a Stocks and Shares ISA and vice versa and savings from previous years can be split between a cash ISA and a Stocks and Shares ISA
- Under current cash ISA transfer rules providers must allow ISA transfers out of a cash ISA but are under no obligation to allow transfers in
- Look out for any ISA transfer penalties from your existing ISA provider particularly if you are transferring from a fixed cash ISA before the end of the fixed term
- In addition some Stocks and Shares ISA platforms apply transfer fees per ISA fund that you transfer. Make sure you check whether your investment platform applies these charges. If they do then you may be able to mitigate them by consolidating the number of ISA investment funds that you have ahead of any ISA transfer
- Aside from the nuances stated above there is no ISA transfer limit and you can transfer an ISA at any time
How long do ISA transfers take?
There is no ISA transfer time limit but if you are transferring a cash ISA to another cash ISA then this process should take no more than 15 days, if it takes longer then under cash ISA transfer rules you should be compensated for loss of interest. If you are transferring in to or out of a Stocks and Shares ISA then the process should take no more than 30 days. If you are transferring from a Stocks and Shares ISA you need to be aware that there may be a charge for selling your investments with your current provider prior to the transfer (if an in specie ISA transfer is not possible)
If you feel your ISA transfer is taking too long then you can complain to your existing ISA provider and then ultimately to the Financial Ombudsman Service
How to transfer an ISA
An ISA transfer is a simple process:
- If you are looking to transfer an ISA then firstly you should do your research to make sure your new provider will accept ISA transfers and give you the best ISA transfer rate or the most comprehensive investment service you require
- Check our comprehensive guide to the Best variable ISA rates if want to transfer into a cash ISA
- If you are looking to transfer into a Stocks and Shares ISA then read our guide Compare the cheapest (and best) investment ISA platforms
- Once you have decided on your new provider then contact them to open an account and complete an ISA transfer form
- Once the account is opened and the ISA transfer forms are completed your new provider will contact your current provider to complete the transfer
Transferring your cash ISA to a Stocks and Shares ISA
If you are looking to transfer your cash ISA to a Stocks and Shares ISA then you will need to decide where to invest your savings. Platforms like Hargreaves Lansdown will have ready made portfolios or you can decide to choose the underlying ISA funds yourself. You could also consider transferring to one of a growing number of Robo-advisers, such as Wealthsimple or Moneyfarm. Robo-advisers offer a range of off-the-shelf portfolios managed by their investment experts and computer algorithms which makes them attractive for investors (particularly novices) who want to invest while keeping costs low, yet who don't have the time or expertise to run their own portfolios. Read our guide Compare the cheapest (and best) investment ISA platforms for more information.
Transferring your Stocks and Shares ISA to a cash ISA
You can transfer a Stocks and Shares or equity ISA to a cash ISA. While it is unusual to do so, you may want to if you no longer want the risk involved with investing in the stock market. In addition, while Stocks and Shares ISAs do provide a temporary holding account for cash the interest rates are miserly. Therefore if you want to hold cash you are better off transferring into a cash ISA but do your research to find the best ISA transfer rates.
How to get the best ISA transfer rates
You can find the best ISA transfer rates by using our cash ISA best buy tables. For each provider listed you will find information about whether they accept ISA transfers or not.
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