The Consolidator’s Guide to ISAs and Investment Accounts

Published: 16 November 2018

Consolidating pension and investment pots into one place can make it easier to understand and keep track of your potential future wealth. It could even save you money in charges. But is it right for you?

Our Consolidator’s Guide articles aim to help you decide, by looking at the practical ins and outs of consolidating different types of savings pots, from personal and workplace Pensions, to ISAs and Investment Accounts.

The potential benefits of consolidating investment pots such as ISAs and Investment Accounts are similar to those for pensions. From making them easier to manage, to helping reduce your costs and maximise your savings.

While there are various reasons why you may want to consider consolidating your non-pension investments, there are some things you should know first about the process and possible pitfalls.

In this guide we focus mainly on ISAs which, as tax-advantaged savings products, come with more rules and restrictions than Investment Accounts but the questions and answers below on charges, choosing an investment platform and getting advice apply to Investment Accounts as well as ISAs.

Can I transfer all types of ISAs?

You can usually transfer between different types of ISAs without losing your tax benefits. Not all ISA providers let transfers in – although, like Alliance Trust Savings, the majority do - but they are obliged by the rules to allow people to transfer out.

There are some restrictions to look out for on certain types of ISAs, however, if you shift money from a Lifetime ISA to a different form of ISA before age 60, for example, you could incur a 25% withdrawal penalty. And if you have an Innovative Finance ISA, any investments you hold other than cash won’t be available in a Stocks & Shares ISA. So you won’t be able to transfer them without either selling (if you can) or waiting for them to mature.

Should I consider moving some or all of a Cash ISA into a Stocks & Shares ISA?

With interest rates still at relatively low levels, consolidating may give you an opportunity to review your overall approach to saving and investing, helping you find the right risk-reward balance for you.

Cash accounts may seem the safe option but there is the risk they don’t protect your savings from inflation, reducing the buying power of your money over time.

Exposing more of your money to the risks and potential rewards of the stock market may give you a better chance of beating inflation over the longer term. But, of course, investment returns can go down as well as up though and you may get back less than you put in. Whether investing is right for you will always depend on your personal circumstances.

Can I move just part of my ISA?

If you're transferring an ISA you've paid into during the current tax year, you'll need to move all of this year's subscription. ISA's from previous tax years, however, can be transferred partially or in full without your annual ISA allowance being affected.

Do I need to withdraw my money and transfer the proceeds?

No. You should always ask the ISA provider you’re planning to consolidate to, to arrange your ISA transfer for you. Otherwise you’ll lose your tax benefits. Transfers aren’t classed as new payments into ISAs, so they don’t take a chunk out of your annual ISA allowance (£20,000 for the 2018/19 tax year).

If your investments in a Stocks and Shares ISA have to be sold as part of the transfer process, you risk missing out on any investment growth during the time you are out of the market. However, if you’re able to transfer ‘in-specie’ (sometimes described as re-registration) your money stays invested. Whether you’ll be able to do this depends on your new ISA provider offering the same investment(s). It’s worth checking this before you decide.

Are there charges for transferring?

It depends on what and how you’re transferring. For example, some investment platforms or brokers will levy a charge per fund or shareholding for in-specie transfers. And if you have to sell investments as part of the transfer process trading charges may apply.

Any exit fees (on stocks and shares ISAs) and interest penalties (on cash ISAs) will vary between provider and some transfers have set-up fees, so it’s worth checking what your existing and your new platform or provider’s terms and conditions are regarding transfers. You don’t want the costs of transferring to outweigh your potential benefits from doing it.

Are there any tax implications if consolidating Investment Accounts?

Because Investment Accounts don’t shelter your savings from tax, if you have to sell your investments to consolidate this type of account you could potentially trigger a liability to pay capital gains tax.

For the 2018/19 tax year the annual exempt amount for capital gains tax is £11,700. You can find out more about this and the circumstances in which you may have to pay it, on the government information website at gov.uk/capital-gains-tax.

What else do I need to consider when it comes to choosing an investment platform for my transfer?

It’s important to assess the ongoing costs and charges and the ad-hoc fees for actions such as trading or switching and compare them to what you pay now. Similarly, check the charges for using different types of investment, should you want to invest in listed securities like Equities, Investment Trusts and Exchange Traded Funds (ETFs), for instance.

You also need to consider the type of charging structure that suits you. While many platforms charge percentage account fees based on the amount invested, others, like Alliance Trust Savings, levy flat account fees. Flat fees tend to be more cost effective at larger account sizes and the former if you’re investing more modest amounts.

How much trading you plan to do can also have a bearing, since dealing charges can potentially add up if you expect to be managing your investments very actively.

So, it’s mainly charges I need to look at?

They are important, but there are other considerations that will depend on your preferences. These may include the range of investments offered, the service levels, online support such as tools and calculators or access to a phone-based service team for example. You need to decide if the charges you’ll pay on consolidating are worth it for the new overall service package you’ll get.

How do I go about doing it?

The good news is that once you’ve done your research, you know where you want to move your ISAs to and have checked they accept transfers, your new ISA provider will do the work for you. And you need to let them do it too, to avoid losing your ISA tax benefits. All you should need to do is provide the relevant account numbers and complete a transfer form.

Should I take advice?

On their own, ISA transfers tend to be less complex than pension transfers and provided they are managed through your new ISA provider shouldn’t have any tax implications for you. If you’re consolidating Investment Accounts though, you might want to take advice on your capital gains tax position. And if you are looking at consolidating either as part of a package including a pension transfer you may well benefit from advice. Alliance Trust Savings can’t give you advice.

Fees paid for financial advice will always add to the overall costs of transferring, but a professional can help you save far more over the long run.

How do I find a Financial Adviser?

The Money Advice Service offers tips on how to choose a Financial Adviser. You can also find an Adviser near you through the FCA register.

Summary

As it is for pensions, consolidating ISAs and Investment Accounts can help provide a clearer overview of your savings, making it easier to keep track and compare how different investments are performing. If you see your ISAs and Investment Accounts as part of your retirement savings package, managing them alongside your pensions in a single place can also make life much easier at the practical level.

But, as always, you should take the time to research things first based on your own personal circumstances. Consider taking professional financial advice if you are unsure whether consolidating is right for you.

Important information

This is provided for general information only and takes no account of personal circumstances. It is not a recommendation to buy or sell. It is provided solely to support you in making your own investment decisions. If you have any doubts as to their suitability you should seek expert advice. Alliance Trust Savings does not give financial or investment advice.

Laws and tax rules may change in the future without notice.

Please be aware that the value of investments can fall as well as rise so you could get back less than you invest.

Consolidate and save?

We charge you flat Account fees rather than fees based on a percentage of the value of your investment.

So as your investments grow your Account fees won’t. If you consolidate from elsewhere you might be surprised just how much you could save.

Please see our Charges Guide for more information.

See how our charges compare

Alliance Trust Savings Limited is registered in Scotland No. SC 98767, registered office, PO Box 164, 8 West Marketgait, Dundee DD1 9YP; is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, firm reference number 116115. Alliance Trust Savings Limited gives no financial or investment advice. ‘Alliance Trust Savings’, ‘ATS’ and 'AT Savings' are all brand names of Alliance Trust Savings Limited together with the ‘Alliance Trust Savings’ logo are owned by and used with the permission of Alliance Trust PLC, the previous owner of Alliance Trust Savings Limited.