The Individual Savings Account (ISA), once badged as a simple, tax-efficient way to save, is growing in complexity. With increasing choice and low interest rates some providers are struggling to keep up.
Individuals have a choice between cash or investment products, fixed-term or flexible products, not to mention options such as the help-to-buy ISA (cash only). The ISA landscape is growing in complexity.
The financial services industry is also moving online. Gone are the days when an individual was happy with their annual update on performance and communicating by post. The digitalisation of everything means that many expect real-time updates on how their investments are performing.
Some traditional providers are struggling to keep up with the technology revolution and many are starting to leave the ISA market. This leaves thousands of investors in need of a new ISA provider. Individuals will usually be provided with an alternative company; but this is not necessarily in their interest, the incoming company will have paid to take on that custom. Those who transfer their account without fully investigating the new provider risk signing up to a cost structure that could well eat into their returns.
So what should customers look for when looking to transfer their ISA?
Cost could be eating your returns
By deciding to save within an ISA you have shown yourself to be aware of costs. But there is little point in taking advantage of tax-efficient savings if you do not pay the same attention to the costs you pay your provider. Both tax and costs eat into your real returns and can have a huge impact on the value of your savings.
Many providers charge platform fees which means you will still pay even if your money is not invested. Not only that but you could also be charged exit fees, many providers will charge you tens of pounds just to withdraw your money. Make sure you check all of the costs you might be charged. If you do not your nest egg could end up much smaller.
Can you access your ISA
Investment providers are increasingly going online. There are a huge number of benefits to this, you can now invest or disinvest at the touch of a button and access information on the move. The industry is more transparent than ever before. But if you are used to an offline provider and would prefer a phone call to an app update, make sure your provider offers that.
Is your ISA secure?
The final thing to consider is how secure your savings are. You need to know whether your provider is covered by the Financial Services Compensation Scheme. If your provider is covered that means investments will be covered up to the value of £50,000.
If you are looking to transfer your ISA, but are unsure about anything give our Investment Consultants a call on 0800 433 4574.