Top 5 tips for ISA transfers from Freetrade

A breakup might not be the first thing you liken an ISA transfer to but every now and again, there can be more similarities than you think.

The good news is there are lessons we can take from rough breakups to make sure our ISA transfers go a lot more smoothly.

So, as you start prepping a few lines for that ISA breakup chat (“It’s not you, it’s your fees”) here are Freetrade Senior Analyst, Emile Stevens’ top 5 most common transfer sticking points and how to avoid them.

Can they take it?

There are two routes to an ISA transfer. Some people prefer to transfer their ISA and stay invested but you can also choose to sell your investments first and transfer the cash.

If you’d like to transfer your ISA and stay invested, before starting the transfer it’s important to check whether your future ISA provider can hold your investments.

This doesn’t need to be an in-law style interrogation. But checking upfront should prevent any nasty surprises later (i.e. finding out that you can’t transfer a certain investment without selling it first).

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Give your real details

We’ve all given the wrong phone number as a decoy once (or twice).

But when it comes to ISA transfers the less coy the better. Making sure your details are correct with your present and future ISA provider is vital.

This starts by making sure you’ve given the right account reference number for your ISA to your future ISA provider.

If you’re unsure, check with your current ISA provider before filling it in.

Also check your name, date of birth, national insurance number and contact details are up to date with both providers.

Know your value

ISA transfers always start with you specifying whether you’d like to transfer all or some of your ISA.

You won’t always have the choice. HMRC ISA rules dictate that any ISA contributions for the current tax year, have to be transferred in full. Whereas with ISA contributions from previous tax years, you have the choice to transfer the whole ISA or just part of it.

When it comes to partial transfers, being able to specify the value of what you’ll be transferring and what it includes acts as a useful marker during the transfer.

The transfer process always involves your current provider sending across a valuation of what’s being transferred to your future ISA provider. And while a mismatch between what you’d like transferred and what your provider says you are transferring is rare (markets move and providers understand), a transfer value estimation helps them double check everything is as expected.

Don’t leave the bill

Walking out of a restaurant and leaving your ex with the bill, might be the last hurrah when it comes to your breakup. But unfortunately, it’s unlikely to have the same effect with an ISA transfer.

Unpaid account fees are one of the most common reasons transfers get held up and even worse if your contact details are out of date on one side of the transaction, even with the best efforts to get in contact with you, things are going to slow down.

Some providers will charge you for leaving their platform, so while you might be up to date in terms of account fees, a closing bill could be a nasty surprise.

Checking if you’ll be charged by your provider is an important step. You might find that selling your investments first and then transferring your ISA as cash is a cheaper route to market.

Dividends also fall into this category. Sometimes due to timing dividends are paid to your previous provider. This isn’t usually a problem, as providers should sweep the account and send you the cash. However, make sure you check this is part of their process before kicking things off.

Make sure you’re ready to move on

Once you’ve started the ISA transfer process, it’s best to try and limit your trading activity over this timeframe.

Most providers will continue to let you buy or sell while your ISA is set for transfer but it’s important to understand this will slow the process down.

Settlement times for different investments vary. Then there’s the fact that if your portfolio has changed your current provider will likely have to restart the transfer process.

If you think you might want to trade over the next few weeks, it’s best to wait until this is complete before you start the transfer.