You know what it's like. You find a great ISA rate and start putting money in, only to find a better deal a few months later. And what if you've got savings from previous years languishing in poor-paying accounts? If you're stuck with pitiful rates of interest it's time to consider the alternatives, and if you follow the right process you can transfer funds with ease.
Let's start with a few basic rules. First of all, you absolutely MUST NOT close the account or withdraw the money you've already saved, because if you do you won't be able to put it back into a fresh ISA this tax year. If you don't want to lose your tax-efficiency, there's a special process that you need to follow instead, which is outlined below.
The next thing you should remember is that, while all providers must allow you to transfer funds out, not all will allow you to transfer previous savings in. This is even more important to remember given the new rules which allow transfers from cash ISAs to stocks & shares ISAs or vice versa – even if some providers allow you to transfer in previous cash ISAs, they may not permit the transfer of stocks & shares funds, so you'll need to double-check before you start the process.
Also, bear in mind that if you're transferring money paid in this year, you'll usually have to transfer the whole lot. Previous year's savings could theoretically be split, but again, it all comes down to your chosen provider's rules, as not all will allow partial transfers.
Be mindful of transfer penalties, too. Some accounts, particularly fixed rate ISAs, will apply hefty interest penalties if you want to transfer the cash before a notice period or your term has come to an end, so make sure you check that the new rate will outweigh the penalty. If not, it may be best to stay put for the time being.
But, if you're comfortable with everything and are sure that your new provider will allow transfers in – and that your old one won't penalise you for transferring out – it's time to get started. It's a very simple process and involves the following steps:
That's it! Some ISA providers will even pay you interest on the money you're looking to transfer from the day you complete the transfer form, so it could pay dividends. The rules regarding stocks & shares transfers could be slightly different, however, so make sure you discuss the options with your provider.
A final word of caution – you won't want to hold more than £85,000 with any one provider, otherwise you won't be covered by the Financial Services Compensation Scheme should it go bust. But, apart from that, feel free to get transferring as you wish. Now all you've got to do is find the best rate!
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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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