The recent fee bomb [1] dropped by Interactive Investor has caused many Monevator readers to think about a swift ISA transfer to other investment platforms [2]. We presented our alternative picks here [3] but what about the stocks and shares ISA transfer process itself? How tricky is it?
Well, there are a few things to think about, and because a fair wedge of Monevator readers are monogamous passive investors [4] who don’t break up relationships unless they really have to, let’s do a quick guide to dumping your ISA provider.
[5]
Dear ISA provider… it’s not me, it’s you
The first thing to note is that a stocks and shares ISA [6] can only be transferred to another stocks and shares ISA. That makes it slightly less flexible than a cash ISA, which can be emptied into a stocks and shares ISA if you fancy it.
That established, you have three options for extracting your ISA from the clammy hands of the unworthy:
1. Cash transfer
Your current platform sells your assets and transfers the cash directly to your new ISA provider. You choose new investments from scratch, making this option good for a brand new start, if things have got a little, ah, messy.
- Your ISA’s anti-tax armour remains unbreached.
- It should take about two weeks to transfer, but it could take up to six.
- You are out of the markets as soon as your assets are sold and until you repurchase a fresh batch. That could go for or against you. No one knows.
2. Stock transfer
The existing contents of your ISA are transferred intact to your new provider. In other words, all your funds and shares are handed over without being sold or repurchased. This type of ISA transfer is often referred to as an in specie transfer, or as re-registration.
- Again, your ISA’s tax status is not compromised.
- It should take about four to six weeks but it often takes several weeks longer.
- You remain in Mr Market at all times and are subject to his whims.
- You won’t be able to trade until the transfer is complete.
3. DIY sell-off
Of course, you can always flog your assets yourself and use the proceeds to open up a new account with another ISA provider.
- Your ISA’s tax powers are very much kyboshed in this scenario.1 [7]
- Transfer out fees are avoided, though perhaps not account closure charges. Also note some platforms will pay your transfer fees to secure your business.
- You’ll pay dealing fees to sell and buy anew.
- You’ll be out of the market for a few days.
Stock transfer: The nitty-gritty
Personally, I would use a stock transfer all day long. The annual advance of a market can occur in just a few days and I’d hate myself if I missed out.
However, there are a couple of potential snag-ettes to watch out for with the ol’ in specie manoeuvre:
- Contact your new provider and old provider to make sure they both play ball when it comes to in specie transfers.
- Check that assets in your old ISA are available in your new one. If not, then talk to your new provider. Otherwise, incompatible assets are likely to be sold.
- Different provider’s forms use different terminology to describe an in specie transfer. Check if you’re not sure which box to tick, and, whatever you do, avoid the box marked ‘liquidate’.
- Your old provider is likely to impose a transfer out charge – just one last pound of flesh before you leave. This is typically £15 – £25 per fund or stock. Some new providers will pay these fees for you. (Occasionally, as with Interactive Investor currently [8], they might be waived. It never hurts to ask!)
To do list
If your old provider’s ‘just one last chance’ pleas have fallen on deaf ears and you’ve identified your new dream partner then completing your stocks and shares ISA transfer isn’t much more daunting than filling in a form:
- Complete the ISA transfer forms provided by your new platform.
- Ask your new provider if it will cover your transfer out fees.
- Tell your old provider to close your account once the transfer is complete. You don’t want them pursuing you for inactivity charges.
- Cancel your old direct debit and relax.
That’s about all you need to know. I’ve got a couple of bullet points left in the tips-gun though so let’s fire ’em off:
- Your new platform should tell you when your account has transferred.
- You can transfer your current year’s ISA, although new money can only be added when the transfer is complete.
- ISA transfers do not count towards your current year’s allowance.
- You can transfer some or all of your previous years’ ISAs.
- You can even partially transfer an ISA. List the assets you’d like to transfer, though note that your old provider can refuse a partial transfer. You can’t partially transfer your current year’s ISA.
- Document all your holdings (names, ISIN codes, quantities held) before you transfer. Take a screenshot of your holdings sitting in your old broker. This will come in very handy should any holdings go astray during the transfer.
That’s it. We’re done. Happy transferring.
Take it steady,
The Accumulator
- In other more boring words, the money you had tucked away in the ISA loses its tax protection. [↩ [13]]