What happens when a stocks and shares Isa transfer goes wrong?

You've found you can get much better value for your investments by switching to another platform – so you move your Isa. But now there’s a problem, and you're left waiting months with your money seemingly nowhere to be found.

For years, investment platforms have struggled to get to grips with Isa transfers, with delays as extreme as 450 days, according to the STAR transfer scheme.

In addition to the stress of chasing answers and not being able to access their money, some customers will be left worse off by bad market timing on their investments.

Here, Which? dives into what goes wrong, and compares Isa transfer systems to help you avoid getting trapped in transfer purgatory.

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How should a stocks and shares Isa transfer work?

According to HMRC guidelines, a stocks and shares Isa transfer should be completed within 30 calendar days.

The process as a customer is fairly straightforward – you fill in the forms online or physically send them off to your new provider.

For a stocks and shares Isa, you’ll either do an ‘in-specie’ transfer, which keeps you invested throughout, or a cash transfer where you sell your investments and transfer the Isa in cash to reinvest with your new provider.

Then it’s time for work to begin behind the scenes – via communications between your current provider and your new choice. And this is where things can go wrong, with some customers left in the dark simply hoping that their money is safe.

• Find out more: stocks and shares Isa transfers explained

How do stocks and shares Isa transfers go wrong?

Delays can come from different parts of the Isa transfer process, or if you're especially unlucky, from many at once.

One customer complained to the Financial Ombudsman Service (FOS) when his transfer to Vanguard was delayed by more than 100 days.

After applying to transfer on 17 April 2021, the customer, referred to as 'Mr M', heard nothing until his Vanguard account and funds came through on 25 August. But, even after waiting for months, the funds were invested incorrectly.

After speaking to Vanguard, Mr M was told to switch the fund across himself on 16 September and that Vanguard would reimburse him the difference between the current price and the best unit price in May. However, the timeframe for which the firm would reimburse him became a contentious issue.

Mr M complained to Vanguard, which replied to him with a timeline of events from its perspective and accepted responsibility for causing 38 business days of delay. It accepted it should have sent Mr M's transfer request to his current provider within five business days, but was 17 business days late in doing so. Vanguard paid Mr M £300 as a goodwill gesture for not meeting its usual standard of service, and recovered the loss to his investment since 7 July.

Mr M felt Vanguard was responsible for more of the delay than this, and took the case to the Ombudsman.

Vanguard outlined the aspects of the transfer beyond its control to the Ombudsman – namely, the platform Mr M was moving from wouldn’t accept an online transfer, and that it was missing some pages in the valuation of Mr M’s account that Vanguard needed to complete the transfer. Vanguard acknowledged it could have responded to this mistake sooner and added 19 business days of delay. It now believed that accounting for the delays of the other company, it was responsible for a total of 36 business days and didn’t need to offer any more compensation.

The Ombudsman’s decision, which came more than a year on from the original transfer request, ruled that Vanguard had been responsible for 50 calendar days of delays (while Vanguard used business days, the HMRC guidelines refer to calendar days) and it should reimburse Mr M for any income he would have received from the fund had he been invested from 3 June. Vanguard told the Ombudsman it had nothing to add after this provisional decision.

Mr M’s case, like many others, saw delays caused by a mix of inaction, mistakes, and clashing systems from each of the platforms.

What transfer options do providers offer?

When you transfer an Isa, you’ll follow the procedure of the platform you switch to, rather than the platform you’re leaving.

We asked the platforms featured in our 'do-it-yourself' stocks and shares Isa provider reviews (stocks and shares Isas on advised platforms aren't included) which processes they do and don’t allow:

Moneybox told us it was unable to process in-specie transfers for individual stocks on its platforms, so investors will have to sell their holdings before transferring in or out. 

The only platforms that couldn't process in-specie transfers were Monzo and Virgin Money. Monzo told us this was because the three funds it offers are in a different share class that is normally reserved for institutional investors, while Virgin Money only offers funds exclusive to its platform.

Aviva, Charles Stanley Direct, HSBC InvestDirect, and Santander Investment Hub still require transfers to be completed by post.

You won’t usually have to pay an exit fee with a do-it-yourself Isa provider, though Charles Stanley Direct and HSBC InvestDirect still charge £10 and £15 per holding, respectively.

• Find out more: best stocks and shares Isas 2024 

What happens if the platforms don't use the same process?

There’s no guarantee that the provider you plan to switch to will have compatible systems with your current provider – something that will make a transfer impossible if it comes up.

In one FOS case, someone had complained about Santander Investment Hub. He had tried to transfer a stocks and shares Isa to another provider, but was unable to complete the transfer because Santander would only send a cheque payment and the receiving provider would only accept BACS payment – and neither would budge. The Ombudsman ruled that Santander was within its rights not to process this request and cancel the transfer.

In this situation, you’d either need to take your money out of your Isa and open a new account and move it across – which would be subject to the £20,000 annual allowance – or choose another provider.

The best investment platforms for transfers

The STAR transfer scheme is an industry-wide group set up in 2022, and supported by the Financial Conduct Authority (FCA) to promote good practice in transfers. It offers accreditations to financial organisations that consistently deliver transfers well.

Of the platforms covered in our reviews, Fidelity International and Hargreaves Lansdown picked up a silver accreditation for Isas and general investment accounts, while Aviva was awarded bronze.

Andrew Marker, head of retail pension and platform proposition lead at Vanguard and the chair of the STAR steering group says: 'Firms with a STAR award are the companies that have some of the best transfer times, working towards the STAR standards. 

'Firms causing delays in the transfer process fall below the STAR standards and are not eligible for an accreditation. The framework for good practice is there to help firms raise their processing performance to deliver better customer outcomes.'

Some platforms are members of the STAR group, but haven’t met the standards for accreditation, while others don’t engage with them at all. The FCA has said it will be pressing those platforms on why they have not engaged with the scheme.

STAR also provides accreditations for SIPPs and other types of transfers.

Why does a delay matter?

With any type of Isa transfer delay, you face the stress of not knowing when you’ll have access to your money again. But, with a stocks and shares Isa transfer, you also run the risk of delays actually costing you money too.

If, for example, the providers you’re switching between don’t offer the same investments, you’ll have to sell your investments and complete a cash transfer.

If all of this puts you off transferring entirely, it’s worth remembering that sticking with a platform that overcharges you in account fees will also see you spending potentially hundreds of pounds more than you need to – without any chance of reimbursement.

• Find out more: compare investment platform fees and charges 

What you can do if your Isa transfer goes wrong

Despite problems being more common than they should be, most transfers will still go ahead without much issue.

When a transfer does go wrong, it could be the fault of either provider and you can complain to either or both about delays or other aspects that could have gone wrong.

If you’re not happy with the company’s response, you can take your complaint to the Financial Ombudsman Service (FOS) – provided it is an FCA-regulated provider. 

The FOS will only be able to consider the fault of the company against which the complaint has been brought. So if only half the delays were caused by the company in your complaint and the rest were caused by the other company, the Ombudsman could only decide on redress for half of the issues.

Similarly, if the delay is related to mistakes you made in the forms you filled out to start the transfer, it's less likely you'll see any compensation.

A typical successful resolution for this type of complaint is a reimbursement of any money lost as a direct result of the company complained about, as well as something in the range of £100 to £300 compensation for the difficulty caused.

• Find out more: can I take my financial complaint to the financial ombudsman?