How to transfer your investment Isa: a beginner's guide
Investors have seen plenty of change this year with commission bans on open-ended fund sales and more generous Isa rules coming into play. But while these changes bring benefits, to get the most from the new environment, it's important to understand how they affect your Isa portfolio.
With trail commission on funds bought via investment platforms scrapped since 1 April, many investment platforms have had to introduce new ways of charging for their services.
Rather than take a percentage of the annual management charge, typically 0.5 per cent a year on the value of your investments, platforms have adopted either a percentage-based fee, a flat fee or a combination of the two. This makes it easier to compare different platforms.
For example, if you have a relatively small portfolio a platform charging a percentage-based fee may be more competitive. These include Axa Self Investor and Fidelity at 0.35 per cent.
If you have a larger portfolio, a fixed fee is likely to offer better value. For example the Share Centre charges £4 a month and Money Observer's sister website Interactive Investor £20 a quarter. On a £100,000 portfolio, these fees would be equivalent to charges of 0.048 per cent and 0.08 per cent respectively.
If you're going to actively manage your Isa, it's also important to weigh up dealing charges. For instance, while Interactive Investor includes two free trades in its quarterly charge, you'll pay extra for these with the Share Centre.
Also look at the breadth of investments on offer. Most platforms offer access to hundreds of different investments but there can be gaps, so make sure your favourites are available.
When assessing what's available, don't be fazed by the terminology. You can transfer an Isa to a Nisa, a New Isa or even an Isa. They're all exactly the same thing.
Cash Isa transfer
It's very simple to transfer a cash Isa and should take no more than 15 working days to complete. If you find a better rate - or you simply want to consolidate your Isas so they're easier to manage - then contact the new provider. They'll get you to complete a transfer form and, if necessary, open a new Isa for you.
Never withdraw the money yourself as it will lose its tax-free Isa status and do check there are no penalties for switching, which may be the case if you have a fixed rate.
It's also possible to transfer existing investments into an Isa wrapper to make them more tax-efficient. Unfortunately the rules don't allow you to transfer them directly into your Isa but, on a platform, the stocks and shares transfer process is still relatively straightforward.
'Bed and Isa' enables you to sell the shares then buy them back straightaway within your Isa. You do need to be aware of a couple of points when doing this.
First, although the repurchase happens immediately after the sale to limit exposure to price movement, you might end up with fewer shares within your Isa.
This is because of commission, stamp duty and any bid offer spread. In addition, because you've sold shares you will realise any capital gains or losses.
There is an exception - shares in a company Share Save or SAYE scheme. These can be transferred directly into an Isa, providing this happens within 90 days of the shares being released.
Stocks and shares Isa transfer
You may also want to transfer a stocks and shares Isa, especially if you find a more competitive platform. If you do find a better deal, the process to transfer a stocks and shares Isa is very simple, as follows:
Contact the new provider and set up an Isa account with them.
Complete an Isa transfer form, which will ask for details of Isas you would like to transfer and, where it is a previous year's Isa, how much of it you would like to transfer.
Decide whether you want an in-specie transfer – where your existing holdings are moved across – or whether you are selling all or some of your holdings first and transferring the cash value.
Wait - your new provider will arrange the transfer on your behalf and it should be completed within 30 working days of your initial request.
Your new provider will notify you when your transfers are completed.
Once your new Isa is in place you might want to review your portfolio. This could particularly be the case if you're consolidating a range of existing Isas or you want to take advantage of some of the additional investments your new provider offers.
It's also important to note that, although HM Revenue & Customs has set a 30 working days time limit for transfer, some providers have been dragging their feet with transfers, particularly those that are in specie. Where this happens, you should contact the new provider. If it's unable to help you can contact the Financial Ombudsman Scheme, who will be able to investigate on your behalf.
If you are ready to open a Stocks and Shares Isa please consider Interactive Investor, our sister site and award winning brokerage.
We make every effort to ensure our beginner's guides are kept up-to-date. However, in the constantly shifting environment of investment and financial services, occasions may arise where elements of a guide become out-of-date. Please double-check the facts before taking any important financial decisions.