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Five things you need to know about Isa transfers

Top tips for making the most of your money


Savings rates have fallen

If you’ve got savings tucked away in cash Isas from previous tax years, moving your money into an account that offers a higher rate of interest could significantly improve your returns. Here are five things you know about Isa transfers, to help you make the most of your tax-free savings.

1. New cash Isas often offer the best rates

Aside from their special tax-free status, cash Isas don’t work any differently from other financial products – and this means new customers usually get the best deals.

If you have Isa savings in accounts from previous tax years, you could be earning rates as low as 0.1% on your money. This is because loyalty rarely pays when it comes to saving; many Isa providers attract customers by offering top returns when accounts are first opened, only to sharply drop their rates later on.

It’s well worth checking the interest rates payable on your old Isas, even if the accounts only date back a couple of years. Compare them with what you could get from a Best Rate cash Isa today, and consider voting with your feet if a new account will offer you more for your money.

2. You must check the small print on the Isa you choose

Before you select a new cash Isa to transfer your money into, make sure you read the small print. Some of the market’s top-paying Isas don’t allow savers to move previous years Isa savings across to them – perhaps because this would leave them paying attractive rates of interest on more substantial sums of money.

If you want to shift your old cash Isa savings into a new account, choose a cash Isa that clearly states it allows ‘transfers in’.

An easy place to look for an account like this is the Which? Best Rate cash Isas table. All of the accounts we list allow transfers in, in line with our strict Best Rate selection policy.

3. You should consider fixed-rate cash Isas and stocks and shares Isas

If you have Isa savings that you know you won’t need access to, it may be worth opting for a fixed-rate cash Isa rather than an easy access deal. Often, savings providers offer higher rates to consumers willing to lock up their money for set periods of time. You can find out which deals our researchers rate by visiting the Which? Best Rate fixed-rate cash Isas page.

It is also important to remember that you are able to transfer cash Isa savings into a stocks and shares Isa. This is an option you may wish to think about if you’re saving for the longer term, as stocks and shares typically outperform cash savings over extended periods of time.

However, it’s crucial to be aware that once you transfer cash Isa savings into a stocks and shares Isa, it is not possible to move them back into cash again.

In addition, if you’re new to investing, you may want to speak to an independent financial adviser and read our beginner’s guide to investment before taking the plunge.

4. You mustn’t withdraw money from a cash Isa if you don’t intend to spend it

If you’re looking to transfer savings from one Isa to another, you must not withdraw your money and try to re-invest it yourself.

This is because you’re only allowed to invest a set amount of money in Isas each tax year (£10,200 for 2010/11) – and once a portion of that is withdrawn, it loses its tax-free benefits and cannot be put back.

If you’re looking to move your savings, rather than intending to spend them, remember: you should never actually get your hands on any cash.

Instead, your Isa providers will handle the transfer on your behalf, arranging to move your money from one institution to another without affecting its tax-free status.

5. You don’t have to consolidate all your Isa savings into one account

Some people looking to transfer their cash Isa savings might prefer to put all their money together in one place, but there is no rule that says you must.

In fact, you might be better off shifting previous years’ Isa savings into one account and opening a separate cash Isa for this year’s allowance. This is because the easy access cash Isas offering the market’s highest rates rarely allow transfers in.

Whether you choose to bundle your Isa savings together or not is up to you – but if you decide to do so, make sure this doesn’t push your total deposits with any financial institution above the £50,000 barrier, which is the maximum sum that would be protected under the Financial Services Compensation Scheme (FSCS) if a participating institution were to fail. It isn’t always easy to spot which banks and building societies are classed as part of the same financial institution. To find about more about the FSCS, how your money would be covered in a crisis and which banks are connected to each other, read the Which? guide.

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