There is lots of noise in the financial services industry about the pros and cons of combining your small pension pots, but what about consolidating your other investments, such as your individual savings accounts (ISAs)?
Platform fees can eat into your investments, so if you have more than one account, you could be paying more than necessary.
Consolidating your finances could help you reduce the amount you pay in management fees, as well as making it easier to monitor investment performance. Depending on the wrapper you use, it could also bring tax advantages.
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An ISA or self-invested personal pension (SIPP) is generally the best wrapper for a DIY investor looking to shield their income and capital gains from the taxman. But there are instances where you might have opened another account too.
Not every investment is suitable for an ISA, including shares traded on exchanges that HMRC doesn’t recognise (such as the Shanghai Stock Exchange and Taiwan Stock Exchange).
ISAs and pensions are also subject to certain annual allowances, so some people open another account to continue investing once they have reached their annual limit.
This takes you to three different accounts already. If you also invest across several investment platforms, you could have even more.
With this in mind, we look at the case for consolidating your investments. How much could you save and what are the key things to look out for?
How much could you save in platform fees?
One of the biggest benefits of consolidating your investment accounts is a potential reduction in fees. The savings could come to hundreds or even thousands of pounds over a number of years, depending on the size of your portfolio.
Investment platform Interactive Investor has analysed the savings you could make by consolidating several ISA accounts. It found that an investor with a £100,000 portfolio, split equally between three major UK providers, could save £858 over a five-year period by consolidating their ISA pots.
This figure rose to £3,197 for an investor with a £250,000 portfolio, and to £6,396 for an investor with a £500,000 portfolio.
The calculations assumed annual investment growth of 5% per annum, with the accounts being consolidated into Interactive Investor’s ISA (which has a flat-fee structure), but investors should do their own research to understand which investment platform would be cheapest for them. We share further analysis below.
“For many investors, ISAs are like a messy drawer – scattered across different providers, each charging their own fees, making it harder to keep track of performance,” said Myron Jobson, senior personal finance analyst at Interactive Investor.
“Consolidating multiple ISAs into a single account isn’t just about tidying up; it can lead to significant cost savings, greater efficiency, and better oversight of your investments,” he added.
The same principle applies across other types of accounts too – including regular investment accounts and, in some cases, pensions.
Before you consolidate your accounts, it is worth shopping around for the cheapest investment platform. This varies from investor to investor, depending on the size of your portfolio. Those with smaller sums to invest could be better off going with a percentage fee structure, while those with larger amounts might prefer a flat-fee structure.
We highlight the impact of percentage versus flat fees across three major investment platforms, looking at portfolios from £1,000 to £500,000.
|
Size of portfolio |
Annual fee with AJ Bell ISA (0.25% on balances up to £250,000, 0.10% on balances from £250,000-£500,000) |
Annual fee with Hargreaves Lansdown ISA (0.45% on balances up to £250,000, 0.25% on balances from £250,000 to £1 million) |
Annual fee with Interactive Investor ISA (£4.99 per month on balances up to £50,000, £11.99 per month after that point) |
|
£1,000 |
£3 |
£5 |
£60 |
|
£5,000 |
£13 |
£23 |
£60 |
|
£10,000 |
£25 |
£45 |
£60 |
|
£15,000 |
£38 |
£68 |
£60 |
|
£20,000 |
£50 |
£90 |
£60 |
|
£25,000 |
£63 |
£113 |
£60 |
|
£50,000 |
£125 |
£225 |
£60 |
|
£75,000 |
£188 |
£338 |
£144 |
|
£100,000 |
£250 |
£450 |
£144 |
|
£125,000 |
£313 |
£563 |
£144 |
|
£150,000 |
£375 |
£675 |
£144 |
|
£175,000 |
£438 |
£788 |
£144 |
|
£200,000 |
£500 |
£900 |
£144 |
|
£300,000 |
£675 |
£1,250 |
£144 |
|
£400,000 |
£775 |
£1,500 |
£144 |
|
£500,000 |
£875 |
£1,750 |
£144 |
Source: MoneyWeek. For illustrative purposes only. Calculations relate specifically to the providers’ ISA accounts. Calculations assume assets held are funds, as different fee caps apply for stocks and shares bought in an AJ Bell or Hargreaves Lansdown stocks and shares ISA.
Transferring investments: what you need to know
When consolidating your investment accounts, there are some important considerations to bear in mind:
- ISA transfer rules: Take particular care when transferring funds from one ISA to another, as failing to do this correctly could result in you losing your tax privileges on the sum in question. You need to contact the provider you want to move to, and complete an ISA transfer form.
- “Bed and ISA” transfer: If you want to move assets from a regular investment account to an ISA to reduce your tax bill, you need to complete something called a “Bed and ISA” transfer. Make sure you leave enough time to do this, as the deadline for this sort of transaction is usually several days before the end of the tax year.
- Tracking down lost investments: If you are tidying up your finances and think you might have lost track of some old accounts, get in touch with the provider in question to see if they can help. You will need proof of ID. If you can’t remember the provider you used, try putting your details into an online tool. There are different ones available depending on whether you are tracing a lost pension, lost shares, lost Premium Bonds or lost savings.
