Why transferring your ISA to a different bank could boost your cash

Savers are often encouraged to switch their savings accounts every now and then to get better interest rates – but experts are suggesting it could be sensible to do the same with your ISAs.

As a reminder, ISA accounts allow you to put away up to £20,000 each year without paying tax on any gains you make.

They can be a great way of building up a savings pot in a tax efficient way, but many people are still paying into accounts with low interest rates.

Transferring an ISA is slightly different to doing so from a standard savings account – here’s what you need to know.

Clare Francis, director of savings and investments at Barclays, says you should first “ask yourself if your money’s working as hard as it could for you”.

For example, you should check whether you’re getting a good interest rate – or whether there are better ones on the market.

As the Bank of England has cut the base rate, savings providers are expected to cut their rates in response.

Yet some of the rates available are still inflation-beating, including those on ISAs, so it is worth transferring if you can.

Remember, some of the digital banking apps or smaller companies might offer higher rates than high-street banks.

“As well as looking at the rate of interest you’re getting on your cash ISA, also consider how long that money’s been sitting there and when you think you’ll need it,” says Ms Francis.

“If you’ve been paying into a cash ISA for a number of years, have never needed to dip into it and don’t envisage having to access it any time soon, consider transferring to a stocks and shares ISA.

“Investing offers the potential for higher returns over the long term, so rather than keeping all your savings in cash, invest some of it. And the benefit of investing within an ISA is that any returns you make are tax-free.”

Once you have decided where you want to transfer your money, the most important rule is that you should never withdraw your money from a cash ISA.

This would cause you to immediately lose all your lasting tax benefits.

What you should do instead is speak to the new provider and fill out an ISA transfer form.

From here, the new provider will sort everything for you and move the money over.

Banks have agreed to a timeline of 15 working days for the transfer to take place, so once this period is up you should begin to receive interest.

You can complain to the ISA provider if the process is taking much longer – this could either speed it up or mean you get compensation if you are losing a substantial chunk of interest due to the delay.

Ms Francis says another thing to check is whether there are any restrictions on taking money out of your existing cash ISA.

“If you have a fixed-rate account you may not be able to move the money until the end of the fixed period, or could lose some of the interest for doing so,” she says.

“Some accounts require you to give a notice before you can move money out.”

Rather than just transferring one ISA account over, you might want to consolidate multiple accounts into one.

This means you will have fewer accounts you need to manage – but you should bear in mind what access you need.

Fixed-rate cash ISAs often pay higher rates of interest than easy-access ISAs, but the access you have to your money may be restricted.

Therefore, it can be worth having more than one cash ISA if you’re happy to lock some of your savings away for a year or two, but want to keep some money accessible just in case you need to dip into it.

If you want to consolidate, you can do this by telling the new provider you want to transfer in from multiple old ISAs.

If you’re lucky enough to have a large chunk of savings, it’s worth making sure you don’t put more than £85,000 into one consolidated ISA.

This is because the Financial Services Compensation Scheme (FSCS) protects up to £85,000 of your savings per financial institution that you keep your money in.

This is possible, but you should check if the new provider offers this.

The rules changed to allow this in April 2024, but some providers still only allow partial transfers of money from previous tax years.