Savings customers, in the UK, can put up to £5,100 each year into a tax-free Individual Savings Account (ISA) but can only deposit money into one ISA in each tax year. The gross interest rate returns available through an ISA mean that they almost always offer a better rate of return than would be gained from a standard instant access savings account, and they therefore form an important part of an optimised financial portfolio. It’s vital though that your money is with an ISA that offers a good rate of return and there may be times when you will need to consider switching to another ISA provider.
Switching your ISA fund to another bank is relatively straightforward. Typically, the process will start with you submitting an account application and you might choose to do this online, via the phone, or by visiting a branch. You will be asked to provide details about yourself such as your name, address, date of birth and, importantly, your national insurance number. At the end of the application process, your request to open the new ISA should normally be approved subject to confirmation of your identity and address.
If you already hold accounts with the bank that you are switching to, then hopefully they will be able to identify you on their system and open the account without requiring you to provide any additional information. However, if you don’t already have a connection with the bank, then they will be required to ask for documentation to confirm your details. If you’re opening the ISA in a branch you can use your driving licence or passport to prove who you are and then use something like a utility bill to prove your address.
The next task is for the funds from your existing ISA to be transferred across into your new ISA. You may be asked to complete an ISA Transfer form and your new bank will then provide you with a switching form to present to your existing bank. This form will contain details of the new ISA (such as bank name, sort code and account number) and you will need to sign it to provide your authority for your existing bank to effect the electronic transfer of funds to your new ISA provider.
The transfer of funds can take a few days but it’s worth diarising to chase your old bank for an update if you don’t receive confirmation within around 10 working days. You should also receive a confirmation letter from your new bank once they have received the funds.
Whilst there’s a little bit of hassle involved in switching your funds from one bank to another, it’s worth doing if there’s a big discrepancy between the rates of interest being offered. The importance of maximising your tax-free returns becomes all the more important during economic periods when interest rates are low. A final point worth remembering is that the ISA year runs from the 5th of April. If you want to be able to pay in your full new year’s entitlement on day one, you will therefore have had to arrange for your new ISA to be opened by the 5th of April and it’s worth allowing a bit of leeway in case the processing of the account switch-over becomes delayed.