Transferring a Stocks and Shares ISA
In some situations, it will make sense to transfer a stocks and shares ISA. You are likely researching this topic if you already have holdings (shares/funds etc.) and you want to transfer them from one platform or institution to another. You might be thinking about doing this for a few reasons. Maybe the investment platform is too difficult to use. The customer service standards might be poor. The costs might be too high. Some platforms increase their transaction charges or their ongoing charges. Maybe you see an attractive, cheaper alternative. The reasons are endless.
But you are probably reading this because, for whatever reason, you are thinking of transferring your Stocks and Shares ISA to another institution. I used this process myself and learned quite a bit from doing it. If you are thinking about doing the same, there are some things to take into account.
How It Works
Normally you apply to the new platform, let’s call this “Platform B”, to transfer your existing stocks and shares ISA. Instead of applying for a new account, there will likely be an option along the lines of “account transfer”. During this process you will state who holds the current ISA you wish to transfer. Let’s call this “Platform A”. You might have to state the holdings/cash you wish to transfer, etc. Once you have applied, platform B will get in touch with platform A and this should all be taken care of for you. Platform A might contact you to confirm that you wish to transfer to the new provider. I found that sending an e-mail to my existing platform right after applying made the process a lot more efficient.
Some platforms will try to disincentivise switching by charging you a one off exit fee. You can usually find out if this will be the case by phoning up or checking a “fees and charges guide”. Now you have to have perspective on this. If you are investing long term then a one off exit fee will likely not outweigh other charges that you might be moving in order to reduce.
If firm A charges £100 to move to firm B, that might put you off. Until you discover firm A has an ongoing management fee of 0.4% per year and firm B has an ongoing fee of 0.15% per year. This will likely save you hundreds if not thousands in the long run, depending on the size of your portfolio.
Change In Dealing Charges
When I moved platform, I was doing so for a few reasons. But one major advantage was that the index funds I wanted to swap to were free to trade on the new platform. I could have invested in those index funds through my existing platform but they would have charged over £10 every time I wanted to buy a share.
The new platform, run by the same company that runs the index funds I wanted to invest in, allowed you to buy their funds in a stocks and shares ISA free of dealing charges. So if I wanted to invest monthly rather than invest a lump sum, this wouldn’t increase dealing costs. This is a huge advantage and could save a lot over the long term.
This has a psychological benefit too. If you know that you are charged every time you want to invest, this is a psychological barrier to investing. You might think there is a huge disadvantage to regularly buying 10 shares costing around £5 each if you are charged £10. And you would be right. You would be spending £10, every time you wanted to invest £50. Without the dealing cost you are free to invest any sum of money (taking into account the annual ISA limit) at any point and in varying amounts.
Remember to take into account dealing charges on different types of investments. Some platforms charge you for buying shares but don’t charge you for buying funds etc. That needs to be taken into account and if you are unsure, get in touch with the platform to check.
Temporarily Out of The Market
This is a problem I ran into, but one that has to be dealt with if you want to transfer to a new platform. Let’s say the new platform does not allow you to hold certain types of investments. Some platforms might only allow you to buy certain funds (eg. their own) so if you are transferring all of your holdings, some shares might need to be sold. You can usually do this in one of two ways. Either, you can sell the holdings in your existing ISA to turn it into a cash holding or it can be done for you as part of the transfer process. There is an important caveat here.
If you want to transfer cash between your old and new S&S ISA, do not withdraw it. Let the cash in your account be transferred automatically as part of the transfer process. If you withdraw cash from platform A to be deposited in platform B, that new deposit will contribute towards your annual ISA allowance.
The transfer process can take time. The process should take no longer than 30 days and if it does, you should contact your ISA provider. The time it usually takes within this window varies a lot. It depends on a number of factors but transferring from one provider might be faster or slower than transferring from another.
Different holdings might also take a different amount of time to transfer. Cash might be moved faster than investments or vice versa. Remember that if your shares are sold to convert your holdings into cash, then you will not be invested during this time. This must be taken into account. If this is the case, you will temporarily be out of the market whilst the transfer is taking place.
Once The Transfer Is Complete
Your holdings have been transferred to your new provider. Now it is the case of reinvesting any cash holdings back into the market and checking all of your investments have been transferred. I would also suggest contacting your old provider to check that everything has been transferred. Also check the status of your old account and check that all outstanding fees have been paid.
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