Cash ISA to Stocks and Shares ISA ?

PensionKid

Hi,

I want to transfer my Abbey Direct (issue 2) Cash ISA into a Stocks and Shares ISA. Is there a 'best time' to do it and also, how is the interest worked out when switching from one to the other?

Any response/recommendations are appreciated,

Cheers,

PensionKid

Lokolo

When you transfer any interest not paid will be transferred with the money.

Not really a best time to do it, just not over April month (or March or May) as a lot of people will be opening new ISAs etc around this time and so it could get delayed.

PensionKid

So Abbey will work out the interest up to the day of transfer? Correct?

Also, how long does the process usually take?

Thanks,

PensionKid .......... slowly sorting his finances out !

Lokolo

I can't tell you how long... only because it really does vary. From around 2 weeks, to 4 weeks, to 2 months! It depends on both providers.

Um basically what happens is your ISA will be closed, a cheque will be written for the amount in ISA + any interest upto that day. The cheque is then sent to the new provider, the new provider then opens up the ISA, deposits the cheque and all done.

So you will lose interest in the time from the cheque -> new provider and new provider -> new ISA. But as I said, this can vary in terms of time.

PensionKid

Thanks Lokolo .... i'll be sorting it all out today. I am thinking about transferring it into the Selftrade S&S ISA.

earlgrey_3

PensionKid wrote: »

I want to transfer my Abbey Direct (issue 2) Cash ISA into a Stocks and Shares ISA. Is there a 'best time' to do it and also, how is the interest worked out when switching from one to the other?

Before you do the switch I assume you know that while you can switch money from a cash ISA to S&S ISA you can't ever switch funds back the other way. Once you transfer to an S&S ISA all cash held within it will be subject to flat rate tax/charge of 20%. That's on top of the fact that ISA fund managers often pay less than 1% interest on cash.

While there is no tax paid by anyone on cash ISAs that's not really the case with a S&S ISA so you need to be sure you'll get any tax savings. Tax on all share dividends is automatic and you are no longer able to reclaim that tax on shares or share investments held in an ISA. If you currently have very large investments that return capital gains exceeding £9600 each year you could save on that.

So if you're a higher rate tax payer and/or pay capital gains tax, maybe, but check the position out carefully. Personally, I've got both cash ISAs and S&S ISAs but wouldn't consider losing the benefits of a cash ISA by moving money to a S&S ISA - especially in the current climate for shares and bonds.