It can often be complex when investors need to transfer their individual savings account (ISA) and do so in a way that’s best suited to building their wealth.
Therefore, this article will take you through what an individual savings account is, what it means to transfer it, and what you should know when considering this move for your finances.
As with any type of a financial decision, we recommend you discuss your options with a modern wealth manager first, such as with the experts at Netwealth wealth management.
What is an ISA?
An individual savings account allows you to invest a certain amount of money each year sheltered from tax.
The annual ISA allowance specifies the maximum limit you can contribute to your ISA each tax year.
You don’t have to pay any tax on the growth of your account, nor any money you choose to draw down as income.
As of the current tax year the annual ISA allowance is £20,000.
There are four types of ISAs to invest in, and your total allowance can be spread across each of these ISAs every year.
Do note, you can only open one of each type of ISA every year:
- Cash ISAs
- Stocks and shares ISAs
- Lifetime ISAs
- Innovative finance ISAs
Another thing to note is that your ISA allowance isn’t carried over into the next tax year, so it’s important to make the most of your allowance each year – hence why diversifying your ISA investments is vital.
What Does it Mean to Transfer Your ISA?
Transferring your ISA is when you take the savings – whether partial or in full – from one of your ISAs, and transfer it to another provider. This can be to another type of ISA, or to the same type, but with a different provider.
There are many reasons why you might want to transfer your ISA:
- There might be a more suitable risk level for ISAs with another provider. This could be better for your financial situation.
- You can keep all your investments in one place, and under the same provider. This can make it easier to manage, and give you more control and visibility.
- You can reduce your costs – potentially boosting your returns – by transferring to a provider where you pay less in fees.
- Transferring your ISA can give you the opportunity to select more diverse investments.
What Should you know when Transferring Your ISA?
There are key things you should be aware of when transferring your ISA:
- When transferring your ISA, if it’s an ISA you’ve invested in for the current tax year, you must transfer the full amount. If it’s an ISA from previous tax years, you can have the option to transfer all or only part of the savings.
- You can transfer any type of ISA to a new provider, but if you choose to transfer cash and assets from a Lifetime ISA before the age of 60, there will be a withdrawal fee of 25%.
- With innovative finance ISAs, you can transfer cash to another provider, but you may not be able to transfer other investments.
- Transferring your ISA is often an easy process. Just contact your new provider and they will contact your current providers for you, and handle the transfer from there.
- It’s best to choose a provider that offers no additional fees for a transfer but check with your current provider if fees might apply.
- The time it takes to transfer an ISA will vary depending on the provider and the type of ISA involved. Usually, you should allow up to 15 business days for a cash ISA transfer, and up to 30 days for a stocks and shares ISA transfer.
Now you know everything you need to transfer your ISA, it may be worth talking to a modern wealth manager so they can recommend the right approach for you.
Please note, the value of your investments can go down as well as up.
Jason is the Marketing Manager at a local advertising company in Australia. He moved to Australia 10 years back for his passion for advertising. Jason recently joined BFA as a volunteer writer and contributes by sharing his valuable experience and knowledge.