Providers are always reviewing their savings products to make sure they are attracting the right number of people. Sometimes this means they’ll want to be at the top of the charts, improving their rate accordingly, while at other times they may want to reduce the number of people applying for an account with them, in which case they might reduce their rate or close the account entirely.
All of this activity means that you’ll want to keep an eye on the savings charts, so you can switch to a more favourable rate when it appears. When your funds are in an ISA, however, there are a few things you’ll want to consider before transferring over to a better deal.
Don't just withdraw the money, close the account and reinvest in another ISA – transferring is key. Withdrawing rather than transferring will mean you lose the tax-free advantages of that savings pot, and if you have several years' worth of ISA savings in cash, you can't automatically put it all into a new ISA because of the annual limit. You MUST transfer the account itself or the funds held within it, otherwise you're effectively starting over.
Avoid withdrawing funds from an ISA if you can, because once withdrawn you lose the tax-free advantages of those savings funds.
The rule is that you're only allowed to pay into one cash ISA per tax year. However, you can transfer ISAs as often as you like – transfers don't technically count as paying in, so if you notice a better rate elsewhere you can make a transfer whenever you wish (provided you only pay into one active ISA per year and you're not locked into a fixed account). It's also worth noting that you can transfer previous years' ISA savings to a better account AND open a new one for the current tax year at the same time – previous savings aren't governed by the ‘one cash ISA per person per year’ rule, and as long as you don't contribute to both it's perfectly acceptable to have another one.
You can transfer funds held in an ISA from one provider to another as long as they accept transfers – not all of them do, so make sure to check. Variable rate accounts tend to be the most willing to accept transfers. It's also worth remembering that some providers will charge interest penalties for transferring the money out (usually fixed rate ISAs or notice accounts) which could negate any benefits of getting a better rate elsewhere, so make sure to check the small print before lining up a new deal.
You can transfer the current year's ISA subscriptions and/or all or part of the previous year's subscriptions to the new account – transfers aren't governed by the usual paying-in limit (currently £20,000) so you can transfer as much as you like. However, if the ISA only contains savings paid in during the current tax year, you must transfer the full account to the new provider, and bear in mind that not all providers allow partial transfers of previous years' savings.
Money held in a cash ISA can be transferred into another cash account or into a stocks & shares ISA, and likewise, assets held in a stocks & shares ISA can be switched back into cash should you wish (this may take more preparation than transferring cash ISAs, however, so make sure to speak to your provider). The same pretty much applies with the innovative finance ISA, but there are additional factors to consider, so again, make sure to speak to your provider about the specifics. Note that money cannot be transferred out of a Lifetime ISA without incurring a penalty, while Help to Buy ISAs do usually allow such access.
It's simple to make a transfer – once you've done your research to find the best rate, and have made sure all applicable ISAs allow transfers, all you have to do is open the new account and complete a short transfer form with the new bank or building society. After that, it's all in the hands of the providers – they'll complete the transfer process and will do so within 15 working days, and you'll be compensated for any lost interest if the process takes longer.
Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.