• Make the most of your savings – expert advice on why you should shop around and transfer your ISA.
  • Beat poor-performing ISAs and remember that loyalty doesn’t pay – switch your ISA for a better interest rate.
  • Consolidation and new savings goals are a great reason to review what ISAs you have.

When it comes to cash savings accounts, sticking with the same provider through thick and thin is rarely a good idea. Leave your money in the same deposit account or cash ISA (individual savings account) for years on end, and you risk paltry returns – especially if your bank or building society reduces interest rates. Which means it can pay to be more active with your savings and transfer your ISA into a better performing account.

Indeed, City regulator the Financial Conduct Authority is looking into whether it should take action to protect cash savers who do not manage to shop around for the best possible rates regularly.

Want to make the make most of a cash windfall? Read our guide on where to invest a lump sum of money.

Look for the best ISA transfer options

Reviewing your savings and investments is one of the most critical aspects of managing your finances. It’s not just savings accounts and cash ISAs that can underperform. Portfolios of stock market-linked assets such as funds, shares and bonds can also fare poorly compared to similar investments. You may need to take action to ensure your capital is on track to meet your long-term financial goals.

The good news is that switching from one ISA provider to another is a straightforward process. Deciding to transfer a cash ISA to a stocks and shares ISA, for example, can be a vital first step in delivering a more rewarding financial future.

Here’s why you should think about moving your ISA, and how to ensure you make the best ISA transfer for you.

1. Loyalty doesn’t pay

Opening a cash ISA and ignoring it for several years can leave you facing low returns. Banks and building societies almost always reserve their best rates for new customers. Over time, the interest rate on cash ISAs is likely to be cut and, in most cases, the only way to get a competitive rate is by switching to a new provider.

2. There is little sign of interest rates rising

High-street banks aren’t the only ones responsible for cutting interest rates. In the wake of the financial crisis of a decade ago, the Bank of England cut the base rate to almost zero. The base rate stayed at 0.5% from 2009 until 2016, at which point it was cut further to 0.25%.

It has since increased to 0.75%, but there is little sign that rates will return to their pre-crisis levels of 5% or more any time soon. For savers with money held in cash ISAs, this state of affairs should prompt savers to look for a potentially more rewarding home for their money.

3. Your savings goals may have changed

A cash ISA is likely to be the right option if you’re saving for a short-term goal such as a wedding, holiday or a mortgage deposit. But if you’re happy to put your money aside for at least five years, the additional risk inherent in stock market-linked investments could be worth weighing up.

If you’re saving for your children’s university fees, for example, or even as a supplement to your pension, a stocks and shares ISA can allow you to make higher annual returns. The longer timeframe also means you have the chance to ride out market volatility that can affect your investments in a stocks and shares ISA.

4. Consolidation makes management easier

Many people have several cash ISAs – the result of picking the top-paying deal each tax year – but transferring these to a single account is a good idea. By putting your entire ISA savings pot into whatever is the best-performing account, you’ll enjoy a better return. Keeping track of your cash savings is easier, too.

5. You’re unhappy with charges or investment performance

ISA transfers aren’t only worth considering between different cash ISAs, or from cash to stocks and shares ISAs. It is also essential to keep an eye on the performance of investments held within a stocks and shares ISA. Look, too, at the terms and conditions that apply to them.

If you’re unhappy with the growth levels currently displayed by your ISA investment portfolio, it could be worth looking for an alternative. But check you’re making a fair comparison against the right benchmark when assessing performance.

You may also be unhappy with the service you receive from your existing provider or find their investment charges too expensive. If so, it may be time to look for a better value alternative. Bear in mind, however, that transferring investments from one stocks and shares ISA to another can incur an exit or penalty fee. 

There are two ways to transfer your stocks and shares ISA from one provider to another. The first involves selling your investments and transferring the cash value to your new provider, which may take a couple of weeks. Alternatively, you can complete an ‘in specie’ transfer (also known as ‘re-registration’), which sees your existing investments transferred to your new stocks and shares ISA provider. This can take between four and six weeks to complete, during which time you can’t sell any of your investments. 

6. Switching is simple

To move an existing ISA, contact the provider of the ISA you wish to move to, and they will administer the transfer once you’ve completed the relevant forms. Do not merely withdraw your old ISA money to move it to a new account. This will eat into your current year’s ISA allowance, and you may not be able to transfer the whole amount.

This process applies to transfers from one cash or stocks and shares ISA to another, as well as from cash ISAs to stocks and shares ISAs and vice-versa.

7. Your annual allowance isn’t affected

In the 2018-19 and 2019-20 tax years, everyone has a £20,000 annual limit for payments into a cash ISA or a stocks and shares ISA. But this allowance applies only to new money that is either added to an existing ISA or used to set up a new ISA.

You can transfer as much of your previous years’ ISA holdings as you want. It won’t have any impact on your current year’s allowance, provided the transfer is carried out in the right way.

Planning on saving a nest egg for grandchildren? Read our guide on saving for grandchildren to know where to start and get expert tips.