Is your ISA cash heavy?

Money with ISA calculator


Julie Hutchison

28th March 2014 at 8:53am

Internet banking is becoming so normal these days, so it always makes me smile when I see my good old fashioned passbook for my building society account. But, unlike my growing collection of chargers for obsolete mobile phones, this relic does still have some use – for a few more months at least.

Cash is king?

It’s for my Cash ISA. Last year, I took out a fixed rate deal, to try to get a better rate of interest. It’s above inflation (just), but it meant locking up my cash for 2 years in the fixed rate deal, so I won’t be accessing it until February 2015.

What am I planning to do with it when the time comes?

I could simply keep it in the Cash ISA and find the best deal around at the time.

Or, I could roll it into a Stocks and Shares ISA. Did you know you could do that?

Everything in moderation

As a child, my parents would take me to the building society with any Christmas money I received, so my savings habit started early.  My focus was on cash – I hadn’t heard of investments.  Cash was simple.  I went to the building society.  I got my passbook updated.  Job done.

But there comes a time when planning for my future involves more than just a focus on cash savings.  As this blog showed, inflation eats away the future value of cash savings, so if I’m thinking longer term, I need to think about investments as well as cash.

If I’ve saved enough elsewhere as an emergency fund to cover, say, six months of expenses, it might be time for me to think about a transfer of my Cash ISA to my Stocks and Shares ISA.

Lift and shift to invest for my future

So, what’s involved in transferring an ISA?  First off, you don’t close your old ISA and withdraw the money to then move to a new ISA.  In reality, the transfer is done directly from one company to another.  This means you start the transfer process by contacting the ISA company you’re transferring to, and they’ll help with the forms you need to sign to make the transfer.

I know I have to live with a few stock market bumps, rather than the certainty of fixed rate cash savings.  But the low returns on cash savings just aren’t meeting my needs any more.  A Stocks and Shares ISA could mean I face that moment when an annual statement shows only low growth or even a drop in value – but this is about the long haul, and I need to resist viewing one year in isolation.

Combining the old with the new

If I did transfer my Cash ISA, I would still have my full year’s Stocks and Shares ISA allowance to play with too.  That’s because my Cash ISA is from a previous tax year (2012/13) – moving it to my Stocks and Shares ISA won’t use-up any of my current year’s ISA allowance.

ISA transfers – the facts

If you’re left wondering what you can and can’t do with ISA transfers, here’s a quick reminder of the rules which apply until 30 June 2014 :

  • Cash ISA to Cash ISA
  • Cash ISA to Stock and Shares ISA
  • Stocks and Shares ISA to Stocks and Shares ISA

Things are expected to become more flexible with the new ISA from 1 July 2014, and its new overall limit of £15,000. You’ll get to choose how that’s allocated between cash, stocks and shares.

If you feel your ISA has become too cash-heavy, or feel low interest rates aren’t giving you enough bang for your buck, maybe you’ve got more ISA choices open to you than you realised.

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The information in this blog and any replies to comments are not financial advice. A Stocks and Shares ISA is an investment. Its value can go up or down and may be worth less than you paid in.