ISA Transfer Rules
Transfer rules governing ISAs are fairly straightforward. If the rate you are receiving on your cash ISA is no longer competitive, you are permitted to transfer the account to another provider without losing the tax-free benefits.
It is vital that the ISA is transferred from one provider to another, and that you do not simply close then reopen another account. This would result in losing the tax-free advantage earned by the account.
Before deciding to transfer your ISA from one provider to another, you should be aware that extremely long transfer times have been reported. In some cases the transfer process has taken months, by which time the rate that enticed the saver to switch accounts may be long gone. It is standard practice for the new provider to only offer the rate on the date on which the new ISA becomes active.
For instance Nationwide have stated that if a rate change occurs before the transaction is completed that the new rate will apply to the account.
ISA transfer rules state the transfer should not exceed 30 days. In practice, however the 30 day limit starts when the manager of the original account receives the necessary paperwork from the new account provider. There is no set time limit for the new provider to contact the original provider, meaning the 30 day limit may not be applicable for an unspecified amount of time.
Some providers have stated that they will honour the rate at the time the ISA account is set up. These include Lloyds TSB and Halifax. However, as stated above, Nationwide only offer the rate applicable on the date they receive funds into the account.
It should also be noted that some providers will impose a penalty if you decide to transfer your ISA. Losing interest amounting to 180 days is typical for fixed rate accounts but policies will vary between providers. Any fines or transfer charges will be outlined in the terms and conditions that you sign when opening the account.