Switching your ISA can be a savvy move for savers, especially given the instability of interest rates in the current financial climate.
By keeping a close eye on rates across the spectrum of ISA providers and transferring when your current rate drops, you can make your account work harder for you.
Switching can make sure you’re receiving the best possible rate on offer at the time and ensures you make the most of your hard-earned savings. But before you do consider transferring, make sure you keep in mind the one fundamental rule of ISA transfers:
If you want to switch your ISA, make sure you do it properly - never just withdraw the money or you'll immediately lose all the tax benefits.
Many people have lost out on their tax-free allowance by not following the correct procedure so make sure you follow the procedure explained below.
How do I Switch my ISA?
ISA switches used to take longer than was practical, this left people wondering if it was worth it and not taking advantage of better deals which may have been on offer. However, thanks to recent guidelines, transferring an ISA from one provider to another is now a fairly straightforward process:
Once you have sent off the ISA switch form, your new ISA provider should contact your current ISA provider within five working days. The ISA transfer process should take no longer than 15 working days.
When an ISA is transferred, the old ISA manager must give the new ISA manager a notice in writing containing information and a declaration, known as a transfer history form.
Once the transfer is done, your new ISA provider will be in touch to confirm this.
Can I Switch one ISA and Open Another?
The short answer is yes - you are free to transfer previous years' ISA balances to a better rate, as well as opening a separate account, as long as you only put cash into the latter account.
You can pay into one cash ISA and one investment ISA each tax year, but transfers don't count as 'paying in'. You can switch as many times as you like, and there's no set time in the tax year when you need to transfer.
Is there a Charge for Switching an ISA?
Not necessarily but it is possible, depending on your provider. Your existing ISA manager cannot stop you switching, but they may charge you for it. However, this is becoming less common, particularly with cash ISAs. You should contact your current ISA provider and confirm their policy on this before making a decision.