Trying to track down and transfer your old ISAs might seem like too much of a hassle, but there are some very good reasons for doing so.
1. Keep everything in one place
It’s easy to forget about old bank accounts or individual savings accounts (ISAs) that you don’t actively use, especially if you shop around for the best deal every year and have lots of ISAs with different providers. And even if you do know how many different accounts/ISAs you have, perhaps you find it too time-consuming to review their performance on a regular basis.
Transferring all your old ISAs into one place could help you to better understand the full value of your wealth and see how it’s all doing all in one place.
You can transfer your ISAs at any time, but be sure to check with your current provider about any potential exit fees or penalties they may impose on you for doing so. Unfortunately, some providers do still charge to transfer ISAs, and these fees might be hidden in the terms and conditions.
2. Invest at the right risk level for you
You may decide that you have absolutely no appetite to take any risk with your money, in which case you might find that a cash option is the best thing for you.
However, if you’re looking to put money aside for the medium to long term, and you’re willing to take on the risk of the value of your money going down as long as it has the potential to make gains, a stocks and shares ISA might be better for you. You can invest according to your risk profile, but beware of just investing in a single investment type (known as asset classes) as you could be putting all your eggs in one basket.
Here at Nutmeg, we give our customers the choice of different portfolios, each one aligned to the specific level of risk they’re prepared to take. We then invest across a broad range of investment types. We also make sure that our customers’ portfolios are exposed to many different locations, asset classes and indices, opening up opportunities for their portfolios to perform well when some markets may be performing badly.
3. Reduce your cost
If you’ve got stocks and shares ISAs, you could be paying over the odds for the management of these. Transferring your ISA accounts to a new provider who charges a lower cost for management could save you a considerable amount of money.
Getting clued up on what you’re paying and how your ISAs are performing is crucial. Over time, fees can add up, known as ‘compounding’. Compound fees can make a huge difference to the eventual size of your portfolio. Finding a low-cost provider is crucial. Paying 1% extra on your investment might not sound like much, but reducing your management fee by that much annually means you get to keep more of your money.
4. Benefit from regular rebalancing
You don’t have to be an investment expert to have a stocks and shares ISA. Find a provider who will give you a fully diversified portfolio of investments and rebalance them regularly on your behalf.
Regular rebalancing ensures that your investments stay in line with your risk profile and that you keep a stable balance of the kinds of things you’ve invested in. If you choose a provider who does all of this for you it means that you don’t have to worry about your investments falling out of step with your tolerance for risk.
5. The potential for better returns
Low interest rates are bad news for savers with cash ISAs. However, there could be some good deals on cash ISAs to be had – if you’re not afraid to shop around and transfer.
But even if you signed up to a cash ISA on a good deal a few years ago, these introductory rates are usually only for new customers. You might find that you’re now getting a much lower rate than the one you were initially offered. And this rate could well be less than the current inflation rate, meaning you’re losing money in real terms.
Despite recent volatility in the markets, if you invest for the long-term, you stand a better chance of outpacing inflation. The good news is that you can transfer all your ISAs, whether they are in investments or cash. If you start investing when the markets are at a lower level, you could stand to gain more over the long-term.
If you’re looking for a stocks and shares ISA, you should look for one that gives you a diversified portfolio of investments, rather than just access to a single fund or individual market index. This will help to spread your risk, which is essential if you’re looking to ride out short-term fluctuations and meet your long-term goals.
As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest. Past or future performance indicators are not a reliable indicator of future performance. A stocks and shares ISA may not be right for everyone and tax rules may change in the future. If you are unsure if an ISA is the right choice for you, please seek financial advice.