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Should you combine your ISAs?

If you’re looking for a simple and tax-efficient way to grow your money, look no further. An ISA can help you maximise your returns, but with many options available it can be difficult knowing you’re doing the right things with your allowance.

Different ISAs serve different purposes, with varying levels of risk operating over different time-scales. The options vary in suitability depending on the broader financial context and on the individual making the investment. For example, the traditionally safe investment of a cash ISA has shown negative real returns over the past decade and the situation is unlikely to change any time soon. 

With that in mind, should you combine your ISAs? Well, yes, and this article will get you well on your way in terms of understanding the decision you are about to make. Alternatively, get in touch and we can talk you through your options.

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Benefits of a cash ISA

When you save money in a cash ISA, your provider pays you tax-free interest on your savings. You can open an ISA with most high-street banks and building societies, although you can only pay into one in a single tax year.

Cash ISAs are good for savers who have a short time horizon and want somewhere tax-efficient to keep their savings until they need their money.

With the returns on cash ISAs negligible for some time, however, any money being kept in an easy access cash ISA has probably been losing value due to inflation.

Imagine you keep your full £20,000 allowance in your cash ISA for one year. If inflation sits at the Bank of England’s 2% target, you’ll need to make £400 just to retain the purchasing power of your savings over that time. This is particularly difficult to do in times of low interest rates, the likes of which we’re experiencing right now. 

Savvy savers, who have paid off expensive debt and have enough money in a cash account to cover three months of outgoings in case of an emergency, are instead turning to the financial markets in the hunt for inflation-beating returns over a medium- to long-term time horizon.

What is a stocks and shares ISA?

Stocks and shares ISAs are there for those who want to make their money work a little harder. You can invest up to the ISA allowance each year, and all dividends and capital growth will be protected by your tax wrapper until you want to take your money out.

Although you’re taking on more risk than you would with a cash ISA by investing in the financial markets, you can manage this risk by building a portfolio that reflects you.

We’re all different; whether it’s our personality, the goals we want to achieve (for example a more financially secure retirement) or our tolerance for risk. These characteristics help build our investor profile, which should influence the way you invest and the asset allocation in your portfolio. 

If you’re more risk-averse and have a short time frame, you might have a larger exposure to fixed income over equities. If you’ve got a long-term time horizon and can afford to take on more risk with your money, you’ll have a higher proportion of riskier assets like equities in your portfolio. By building a portfolio around your goals and your risk tolerance, you’re giving yourself the best chance of meeting these goals over the long term. 

What is the ISA allowance?

Individuals have an annual allowance of £20,000 which they can choose to put into an ISA. Alternatively, you can split your allowance between a stocks and shares ISA, cash ISA, Lifetime ISA (LISA), and Innovative Finance ISA.

You can only set up and pay into one of each ISA products in the tax year – although you can split your contributions between multiple portfolios with different risk levels. Many stocks and shares ISAs are flexible, which means you can put money in, take it out and replace it within the tax year without it affecting your allowance.

You don’t have to use all of your £20,000 ISA allowance, just what you’re comfortable with. But, as you can’t roll it into the next tax year, it’s worth remembering you either use it or lose it.

Should you be investing?

Cash savings accounts are an important part of financial planning. Especially as they’re not exposed to short-term fluctuations on the stock market. But you could be missing out on returns by not taking on any risk at all.


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It can be difficult understanding the best way to manage your money, but this can lead many savers to accept the small returns on cash ISAs over taking to the financial markets in the search for inflation-beating returns.  

This can be a costly decision to make. We recently conducted a 10-year study comparing the returns from a cash account to a stocks and shares ISA. In periods of low interest that fails to outpace inflation, cash loses its real value over time and can represent a poor investment for anyone looking to preserve and grow their wealth of the long term. Naturally, volatility over the period for the stocks and shares profile was higher, but over a longer period the returns to be made were significantly greater.

How risk can help

Risk is one of the most misunderstood concepts in the financial markets. In the real world, it’s synonymous with danger, but on the markets, it’s the dynamic that allows investors to protect their money from inflation and grow it for the future.

The more risk you can take with your money, the higher the returns you can expect – although the further your investments can also fall. Those who want to protect the value of their initial investment will sacrifice the prospect of blockbuster returns for the element of protection.

Whilst investors pore over the best strategies to help put them reach their financial goals, all they really need is time. Stocks and shares ISAs are overwhelmingly more likely to outperform their cash counterparts, research from MoneyWeek shows.

There are many reasons why you might want to transfer your ISA, whether it’s because your money is locked in cash losing value to inflation, or it’s taking too much time and money to manage your investments yourself, and your portfolio isn’t performing as well as you’d like.

The good news is that if you’re unhappy with how your ISA is performing, you can move it to help it grow better.

Should you combine your ISAs?

Both cash and stocks and shares ISAs – and their different varieties – have important roles in financial planning. If you’ve got a long-term horizon and want to invest, you’ll still want somewhere tax-efficient to keep your rainy day fund.

It’s important you take advantage of the suite of ISA options available to you, to ensure you’re making your money work in the best way for you.

It might be time to think about moving your ISA if:

  • Your returns are lower than inflation. The purchasing power of your savings is shrinking over time.
  • You’re missing out on the important things in life because it’s taking you hours to manage your savings or investments. You could be with a provider that does it all for you.
  • Your ISA is costing you a small fortune or you can’t work out what you’re paying. Fees should be simple and low-cost.

Transfer cash ISAs into stocks and shares

All you have to do to transfer your ISA to Moneyfarm is fill in a form online. Then, send it back to us and we’ll do the rest. We’ll also never charge you a fee to transfer in or away from Moneyfarm, although your current provider might.

You can find the ISA transfer form in the ‘actions’ section inside the details of your ISA portfolio. Once we have your ISA form, it typically takes between 15-30 days to transfer, although this is up to your current provider.

It’s essential you transfer your ISA properly. Otherwise, you could break the tax-free wrapper around your savings.

You can transfer any type of ISA to Moneyfarm, whether it’s a cash ISA or stocks and shares ISA. Unlike topping up your ISA, there’s no deadline for transfers, as moving your ISA around doesn’t count towards your annual allowance.

Just remember, if you’re transferring an ISA in the same tax year, you’ll have to move the whole thing, to make it easier for the government to keep on top of ISA contributions. With older ISAs you can choose how much you want to transfer.

At Moneyfarm, our mission is to make our investors’ money work harder for them. We take care of the details, while giving our investors as much control as they like so that they can get on with the things that really matter to them. Holding a stocks and shares ISA shouldn’t be a complicated part of your life – starting with the transfer, we make sure it’s as simple as possible.

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As with all investing, your capital is at risk. The value of your portfolio with Moneyfarm can go down as well as up and you may get back less than you invest.