6 reasons to transfer your ISA that can make you more money

If you’ve got old ISA savings or investments, it’s time you took a closer look because they are probably not making you as much money as they should be. When you move your money from one ISA account to another, it’s called an ‘ISA transfer’. These can be useful if you want to switch between ISA providers or different types of ISA accounts.

Why transfer your ISA?

In this guide, we’ll give you six good reasons why transferring your ISA can increase your profits.

1. Lower fees – high street banks and traditional investment providers have notoriously high fees for investment ISA accounts. By switching to a lower-cost provider like AJ Bell, you can significantly reduce the cost of running your investment ISA.
2. More investment options – the stock market always outperforms cash in the long-run so by transfering your cash ISA into an investment ISA you can get exposure to growth stocks like Nvidia.
3. Lower dealing costs – some investment platforms charge everytime you buy and sell shares, others have very low dealing costs like Interactive Brokers (who also don’t charge an account fee for a stocks and shares ISA).
4. Better interest rates – when you have an investment ISA but have spare cash in the account, the ISA provider should pay you interest on your uninvested cash. Some brokers don’t pay any, but others like Interactive Investor, pay over 4%.
5. Get more flexibility – sometimes, you need to take money out of your ISA to cover the costs of living. If you don’t have a flexible ISA, when you put it back in again, it gets deducted from your annual ISA allowance, potentially increasing the amount of tax you’ll pay on your profits.
6. Welcome bonuses – it is possible to get a ISA cash-back deal when you transfer your ISA, for instance, if you switch your ISA to Wealthify, you can earn between £50 and £500 depending on the amount you transfer.

How do you transfer an ISA?

When transferring money from one ISA to another, it’s crucial that you complete an ISA transfer form. If you just withdraw your money from your current ISA account and move it manually to another, your money will lose its tax-free status.

Transferring an ISA is otherwise a simple process. All you need to do is contact the ISA provider that you wish to transfer your money to and complete an ISA transfer form. The provider will then take care of the transfer process for you.

ISA transfer rules

When transferring an ISA, there are a few rules to be aware of. Here’s a look at some of the main rules:

• You can transfer your ISA from one provider to another at any time
• You can make as many ISA transfers as you want. However, you cannot contribute more than the annual ISA allowance (currently £20,000) to the different ISA accounts
• You are allowed to transfer between different types of ISAs. For example, you can transfer a cash ISA to a stocks and shares ISA
• If you wish to transfer money you’ve invested in an ISA in the current tax year, you must transfer all of it. For money you’ve invested in previous tax years, you can choose to transfer all or part of it
• If you transfer ISAs from previous tax years, the transfer won’t impact your current tax year ISA allowance.
• If you transfer cash or assets from a lifetime ISA to a different type of ISA before the age of 60, you will have to pay a withdrawal fee of 25%.

The benefits of transferring an ISA

• Access to more superior ISA products – You could use an ISA transfer to transfer a cash ISA to a provider offering a higher interest rate than your current provider is offering. Similarly, you could transfer a stocks and shares ISA to a provider offering more investment options than your current one is offering
• The ability to consolidate ISA accounts – This can be useful if you have multiple ISAs and you want to bring them together to simplify things.
• Access to different types of investments – If you’ve previously held money in a cash ISA but now wish to invest your capital in the stock market, you could transfer your money to a stocks and shares ISA.

The drawbacks of transferring an ISA

• Processing time – Sometimes ISA transfers can take over a month. If you have money invested within a stocks and shares ISA, this can mean you’re out of the market for a while
• Fees – Before starting an ISA transfer, you should check with your current provider to see if there are any exit fees.

Does transferring an ISA count as opening a new one?

No. Transferring an ISA does not count as opening a new one.

If you had contributed to an ISA and then transferred it to a new provider in the same tax year, you would still be able to pay into the new ISA.

Is transferring a cash ISA to stocks and shares ISA a good idea?

Transferring a cash to a stocks and shares ISA can be a good idea if you plan to invest your money. With a stocks and shares ISA, you can invest in a range of assets including stocks, investment funds, ETFs, and investment trusts. These kinds of assets are not available in a cash ISA.

How long does an ISA transfer take?

The processing time for an ISA transfer depends on a few factors including the type of ISA and the provider you wish to transfer to. But here is a rough guide to transfer times:

• Cash to cash ISA  – Up to 15 working days
• Cash to stocks and shares ISA – Up to 30 days
• Stocks and shares to cash ISA – Up to 30 days
• Stocks and shares to another stocks and shares ISA – Up to three months depending on the complexity of the investments held.

It’s worth noting that some ISA providers provide a breakdown of approximate ISA transfer times. For example, AJ Bell says that for transfers to its platform, the typical time taken is:

• Cash only – 2 to 4 weeks
• Shares – 4 to 6 weeks
• Funds – 6 to 8 weeks
• International shares – 10 to 12 weeks

How to transfer an ISA in three simple steps

• Step 1 – Decide on the provider you wish to transfer your ISA to
• Step 2 – Contact that provider and get an ISA transfer form (you can often find and complete these forms on providers’ websites)
• Step 3 – Complete the ISA transfer form.