Given the recent rise in Bitcoin, it’s a shame we’re not all invested in it. For most of us, we choose to shelter our savings in either pensions or ISAs.
An Individual Savings Account (ISA) is a Government-sponsored account in which all the interest you earn is tax-free.
There are four mains types of ISA:
- instant access cash ISA – most like a standard bank or building society business account with a lower rate of interest because you can access your cash flexibly
- fixed rate cash ISA – your cash is locked in to this type of account for a higher return for between one to five years
- regular savings cash ISA – enjoy a fixed rate of interest over an extended set period as long as you make a regular monthly contribution
- stocks and shares ISA – as the name suggests, your money is invested in stocks and shares on regulated markets like the London Stock Exchange
Some ISAs pay a very low rate of interest. You can make as many transfers as you want during a tax year to different ISAs however you are restricted to making new contributions into one cash ISA and one stocks and shares ISA each year.
Always make sure that you entrust a professional with making the transfers as the rules are quite tight on how transfers are made. Step on the wrong side of the regulations and your savings may become liable to tax.
Once you’ve found the new cash ISA you wish to transfer into
As soon as you’ve found the cash ISA you wish to transfer to and the mechanism for transfer has been set up, the whole process should take no longer than 15 working days. Most transfers however happen within seven working days now.
Some, but not all, providers will begin paying you interest from the day they receive your signed form, even if the money has not landed into your new account yet.
During the year, there are no restrictions on the number of times you can transfer accounts so it always pays to keep an eye out for competitors offering better deals.
You can transfer all or part of your previous years’ savings without it affecting the ISA allowance you have for the current financial year. For any money you’ve paid into an ISA this year, when transferring, you must transfer all of this year’s savings.
Be careful though because while you can have multiple ISAs that are now inactive, you can only use one active cash ISA in each tax year (the account you’re paying new ISA money into).
If you want to transfer to a stocks and shares ISA
Investments into stocks and shares can produce much higher returns for you than standard cash ISAs. However, if the value of the stocks and shares fall, you may find that that you lose money.
First, select the stocks and shares ISA provider whose terms, approach, and fees you feel happiest with.
Ask your provider to send you a transfer form along with your application form and let them handle the transfer of cash into your new stocks and shares ISA.
Within 30 days, your stocks and shares ISA provider will let you know once the transfer has taken place.
All things ISAs, LISAs, and pensions
Want to discuss your pensions and investment situation? Keen to see if there’s a better way for you?
Talk to Smart Team on 01202 577 500 or email us on [email protected]