Unifying investments – Bring an ISA and a SIPP together
This is a Guest Post by Clive and I decided to publish it to signal my refocusing interests. I hope many of my readers find the article informative and useful.
The current financial markets around the globe continue to be extremely volatile. This volatility requires an investor to closely monitor the progress of their investments in order to avoid significant losses and to capitalise upon opportunities that may arise.
This process can be extremely time-consuming and stressful for investors. This situation can be made worse if an investor has funds, ISAs or pensions with multiple providers as the processes for managing the investment will each be slightly different and require a different set of actions to be completed. Investment information could be split across several websites for example, each with different log-ins and security procedures, as well as different investment managers and locations.
Some providers and managers are now offering methods designed to streamline this process and make the management of differing investments far more efficient and effective. Bringing an ISA and SIPP together for example has a range of significant benefits for the busy investor.
What are these benefits?
Investors are able to manage all aspects of their investments in one location via a consolidated online Account Management service.
Unification of fund management makes it possible for investors to track the progress of their investments by combining all information into one, combined statement.
Queries relating to any aspect of an investor’s activity can be resolved by contacting one, often UK-based team with expertise in all areas relevant to a specific investor’s requirements.
The process of merging investments will be managed by the provider an investor has chosen, if that provider offers the facility to do so. This ensures that the procedure is again far more straightforward than some investors may believe, and will allow them to focus upon performance success rather than administrative concerns.
Some providers are offering cash-back incentives to investors who complete the unification of their investments and so cash can be freed up for short-term needs.
How can this be achieved?
Some investment managers do not provide this service and so investors who wish to may have to transfer their funds to a different fund provider. There are several different methods of achieving a successful and efficient transfer of investments such as;
Re-registration for investment funds, pensions and ISAs
If an investor chooses to re-register, then their money remains invested in their funds and the fund continues in the same way. The new provider simply takes over the management and administration of your units enabling the invested money to stay in the market at all points during the process.
When investments held within an ISA are re-registered, the tax allowances remain unaffected.
Some fund managers may charge investors for transferring and re-registering the fund but many providers, such as Fidelity Worldwide Investment, will refund this money when a fund is transferred to them to a maximum value of £300.
Transfer as cash
If an investment fund provider does not support the re-registration process then investors have the option of transferring their investment fund, ISA or pension, as cash.
Utilising this method requires the investor to sell their funds and then purchase new ones with a new provider. The current provider will handle the sale of the existing funds and then transfer the cash to the new provider so that it can be reinvested in-line with a new investment strategy, over which the investor retains their control.
In the event of purchasing the new funds, some investors may be subject to an initial charge, dependent upon the specifications of the new provider. However, there are many funds that do not apply an initial charge and so only the annual management charge will be payable.
It is important for investors to remember that if embarking upon a cash transfer then they will be out of the market for a short time whilst the procedure is completed and so the value of their holding may be impacted by market movements.
As with any investment, the value of funds, and the income from them, can go down as well as up so investors may get back less than originally invested. Remember, the eligibility to invest in an ISA or SIPP will depend on your individual circumstances, and they might not be around for ever as all tax rules may change in the future. You will be out of the market while your money is being transferred, so you could miss out on growth and income if the market rises during this time. However, there is also a chance that you will benefit if the market falls while your money is being transferred.
Clive Wedderburn is a freelance writer/editor/author, with interests in Architecture, Arts and Literature, East-West Politics, Media and Global Investment. He continues to work in dynamic fields such as The National Theatre and the BBC. For more information on ISA and Sipps see Fidelity UK website.