A common ISA misconception is that you can’t move your existing ISAs from one provider to another. But you can. It’s relatively easy to transfer ISAs and, in doing so, you may increase the returns on your money.
Much like your mortgage, you shouldn’t feel like you’re saddled forever with the first ISA provider choice you make. Contrary to the common misconception about this, you’re free to shop around and transfer your ISAs to other providers whenever you wish.
Reasons to transfer an ISA
Wondering why one would bother transferring an ISA? The primary reason would be to make your money work harder for you, especially if you’ve got an account with a low interest rate. Lots of cash ISA providers award customers with good introductory rates. As cash ISA rates are currently generally quite low across the board, it might be worth taking the time to shop around for a better deal.
Other reasons why you might want to consider transferring an ISA include:
- switching from cash to a stocks and shares ISA for better returns over the longer term – although there is a possibility that you can lose money
- finding a stocks and shares ISA provider that offers lower fees, or that you think will deliver better long-term returns on your investment
- reducing the management costs of your stocks and shares ISAs by consolidating them, and potentially boosting your long-term net returns
- combining lots of ISAs to reduce your paperwork and admin
Once you know the ins and outs, moving to a new ISA provider is relatively easy. These eight frequently asked ISA transfer questions – and their answers – should tell you what you need to know.
1. Can I transfer a cash ISA?
Yes. You can transfer a cash ISA from one provider to another. You can also switch a cash ISA to a stocks and shares ISA.
2. Can I transfer a stocks and shares ISA?
Yes. You can transfer a stocks and shares ISA from one provider to another. You can also switch a stocks and shares ISA to a cash ISA.
3. Can I transfer part of an ISA?
Yes, for previous years’ ISA subscriptions. For your current year’s ISA allowance, you have to transfer the full amount.
4. How often can I transfer my ISAs?
You can transfer your ISAs between providers as many times as you like within a tax year.
5. Does transferring ISAs affect my annual ISA allowance?
ISA transfers aren’t included within the paying-in limits, so moving from one provider to another doesn’t affect your annual ISA allowance.
6. How do I transfer my ISA?
Always remember the golden rule: never withdraw the money yourself – instead, use your new provider’s transfer service. If you withdraw from one ISA and deposit into another, it will count towards your annual allowance and you will lose any future tax advantages on the amount withdrawn.
7. How quick is an ISA transfer?
This depends on your old and new providers. Using Nutmeg as the example, once we’ve received your ISA transfer details, we’ll work with your current provider to transfer your ISA to us — safely and securely. This process normally takes between 15 and 30 days.
8. Does it cost money to transfer an ISA?
It’s rare that you’d need to pay your new provider to transfer an ISA to them. But look out for exit fees your old provider might charge should you choose to leave them. It’s best to research and be aware of any possible charges before you open an ISA with a new provider.
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Risk warning: As with all investing, your capital is at risk. 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 independent financial advice.