3 Things to Consider Before Transferring Funds to A New ISA Service Provider

29 Jan 2019
Articles

An individual savings account (ISA), a personal savings account, seems ideal in contrast to the tax-dependent savings account you have in your bank. ISAs are tax-free but can only be opened during the tax year. However, despite this, ISAs can be entertained throughout tax-free years as well, which means that they can hold your savings without any discrepancy.

While there is a certain limit to the amount of money you can store in your ISA, it usually depends on how much you can actually save per tax year. One of the ISAs, the Lifetime ISA can hold only £4000 every tax year, which differs from the rest of the other types which allows you to save up to £20,000 per tax year. Since you can save up to £20,000 in your ISA, you can choose from the different types of ISAs and divide your allowance accordingly to make up the entire amount.

However, since there are plenty of providers to choose from, it is advisable to compare ISA rates before making a decision in haste. Mentioned below is a brief guide that tells you what you should consider before changing ISA service providers.

1.Cater to Comparison Websites

In order to transfer your investments into an ISA under a new service provider, make sure you cater to comparison websites to dig up a thorough background check on the shortlisted ones. Comparison websites tend to reveal several clauses, and also help you to find out whether they provide enough incentives for you to make that choice. Comparison websites such as MoneyPug are ideal for shortlisting ISA service providers.

2.Does Your Service Provider Allow Transfers?

Before making a decision, make sure your service provider agrees to transfers of investments from all the previous tax years. Also, it is highly necessary that you move your funds from your previous ISA to a new one instead of withdrawing, because the latter would make you lose your tax-free benefits at a price you’d be unable to pay.

It is also advisable that you confirm the mode of transfer before running into any extra charges as imposed by the new service provider. Most service providers agree to transfers in cash which means that they would readily sell the shares and move the funds to your new ISA account without any hurdle. However, most service providers cater to ‘in specie’ transfers which allow them to readily transfer your investments in shares or funds without imposing a hindrance to your market availability.

3.Beware of Hidden Charges

While you’d take your time to compare the incentives of each ISA service provider, make sure you confirm your process after checking out any hidden or additional charges. Most service providers tend to rescue you by taking care of the transfer charges, while many would tend to present you with cash-back incentives and guarantees so that you wouldn’t consider switching from them in your lifetime.

While speaking of your lifetime, make sure you look into ‘Lifetime ISAs’ in detail since they tend to penalise by putting a 25 per cent charge on transfers if you’re less than 60 years of age. Most service providers put ‘Help to buy ISA’ under the same category as of the ‘Cash ISA’ which makes it impossible for people to possess at the same time. However, most service providers tend to offer their consumers with a ‘Cash ISA Wrapper’ that allows them to hold both of their ISAs at the same time.