There are numerous reasons why you might wish to switch a SIPP, ISA or personal pension to another provider.

Poor investment performance, simplifying your finances, or bad customer service are just a few of the reasons that come to mind.

Of course, you could simply withdraw the assets held within your SIPP, ISA or private pension, close your account and sign up with a new provider. However, that might not be the best approach. By transferring it instead, not only do the existing provider and the new provider do most of the work, but you preserve the tax advantages. For example, transferring a stocks and shares ISA means the assets remain within the ISA tax wrapper, allowing you to carry over the unused portion of your £20,000 Annual ISA Subscription Allowance. Among the reasons for transferring a personal pension and not cashing it in is that the latter course of action is likely to have major tax implications.

When transferring to a new provider, there are essentially two ways of doing so; Cash transfers and in specie transfers. A cash transfer is exactly what it says on the tin. The current provider sells the assets which are converted into cash. The proceeds are then transferred to the new provider. With an in specie transfer (a Latin term meaning ‘in the actual form’) the assets aren’t sold but are reregistered, passing ownership from old provider to the new provider.

To explain more about how the two types of transfers work, I spoke to members of the Courtiers New Business and Investment Operations Teams. It’s important to say that other companies may do things slightly differently. However, the basic principles will be the same.

What’s the process?

Courtiers receives an application from an individual to open an ISA or SIPP. Once various checks have been completed internally, a portfolio account is set up. A transfer in application made by the client generates a request from Courtiers to their existing provider. In most cases this is sent electronically. The exceptions are ISA cash transfers and when the client’s current provider is not on the list of approved providers. In these cases, the transfer request is sent by post.

Advantages and disadvantages

A potential disadvantage of a cash transfer is that the client is out of the market during the period between the assets being sold by the current provider and when they are bought back by the new provider. This can work both ways. While the client won’t benefit from any market rise, if the market falls, they’ll benefit because they’ll have reacquired the same assets, only at a lower cost.

How long you’re out of the market depends on lots of different factors, including how many different assets you hold, how easy it is to sell them and how quickly the cash is transferred to the new provider once sold. What helps to reduce time out of the market is that generally existing providers avoid selling assets until as much paperwork as possible has been completed.

Another point to bear in mind is that some providers apply dealing charges when selling the assets.

With an in specie transfer, because your assets aren’t actually sold and converted into cash and are instead reregistered with the new provider, you’re not out of the market at all.

The only time an in specie transfer into Courtiers takes a person out of the market is when non-Courtiers (or third-party) funds are being switched to Courtiers funds. However, in these cases time spent out of the market can be as little as one day.

How long do transfers take?

The time taken to complete transfers varies between companies, depending on the efficiency of their processes, whether the documentation is in order, and the information requirements of the existing provider. A J Bell, one of the UK’s best-known brokers, says the length of time taken to transfer a SIPP to them from another provider will depend on the type of investment you’re transferring. As a guide it says; cash only is 2-4 weeks, equities 4-6 weeks and funds 6-8 weeks.

How long do transfers in to Courtiers take?

Transfers in to Courtiers generally take;

Cash transfers

Roughly four to six weeks for pension and SIPP transfers. However, it can sometimes be longer depending on how quickly the existing provider processes the transfer application. For example, some pension providers insist that people attend a Pension Wise appointment. Pension Wise is a government-backed pension guidance service provided by MoneyHelper. Cash transfers from a collective take a bit longer. For ISA transfers it’s normally within two weeks.

In specie

For pensions and SIPPs, two to three weeks. Sometimes it can take just a week.

SIPPs and ISAs take about the same time for the transfer to go through.

If Courtiers funds are held on the Fidelity platform they can be done “pretty much near enough the same day”.

Transfers in from collectives take a bit longer because generally more third-party funds are involved.

What might hold up the process?

An individual holds a class of share, which Courtiers doesn’t have permission from the fund manager to hold. This could mean having to convert it into a different share class, probably with higher charges.

A client could hold a fund with a fund manager with whom Courtiers doesn’t have a nominee account. It could take two to three weeks to set up a new account.

What happens when someone wants to transfer a private pension, ISA or SIPP that holds third-party funds e.g. Artemis, Investec or Jupiter funds to Courtiers?

Courtiers has nominee companies, which are accounts with fund managers such as Artemis, Schroders and Blackrock, which allow these funds to be transferred to the Courtiers platform. Where Courtiers funds are listed on large platforms like Fidelity and Transact, it’s relatively simple to carry out an in specie transfer, which moves them onto the Courtiers platform.

What assets can Courtiers hold on its platform?

Courtiers can accept most assets, certainly regular funds and UK equities. That said, direct equities are held with Courtiers broker Charles Stanley, so ultimately it depends on whether they are willing to hold a particular equity.

What happens to any dividends? Any dividends due will be transferred to Courtiers, who will send them on to the client.

Can partial transfers be made?

Where clients hold a mixture of Courtiers and third-party funds, the Courtiers funds can be transferred in specie, while the other funds can be sold and the proceeds transferred to Courtiers in cash.

Where an individual holds a suspended fund or one that Courtiers does not have permission from the fund manager to hold that fund remains with their current provider while the remaining funds can be transferred to Courtiers. However, this depends on the existing provider. Generally they don’t allow a transfer under these circumstances.

Where cash is held alongside funds in a SIPP or ISA, it will be transferred to Courtiers.

Initial fees

Some companies apply an initial charge on assets transferred to them. As a general rule there’s no initial charge when transferring assets to Courtiers. However, additional charges, for example an ongoing research fee, may apply depending on the nature and the complexity of the assets to be transferred. Some providers may charge a ‘transfer out’ or exit fee, often per fund.

Graeme Clark on why people transfer their ISAs, SIPPs and personal pensions to Courtiers

Graeme Clark, Chartered Financial Planner in the Courtiers Private Client Team, told me that the need to consolidate and simplify their finances was one of the reasons that people transfer their existing stocks & shares ISAs (Individual Savings Accounts), personal pensions and SIPPs (Self-Invested Personal Pensions) to Courtiers.

“We often find that people have stocks and shares ISAs and private pensions and SIPPS from different providers dotted around everywhere,” he says. This makes it very difficult to keep tabs on how their investments are performing and to work out the overall return and to know whether they’re saving enough. Having multiple accounts with different pension and ISA providers also means duplication of fees and costs. And of course, more administration and burdensome paperwork.

Graeme says another reason is that existing investments, perhaps taken out many years ago no longer align with their risk profile. In the past, typically someone might have been happy to put their money into above average risk investments. However, as the years go by and they near or enter retirement they may no longer feel comfortable with the same level of risk, making those investments no longer appropriate.

Each Courtiers fund has a defined level of risk, and a rigorous process ensures that any investment is aligned with each client’s risk appetite, which is regularly reviewed.

Another reason people transfer to the Courtiers ISA is that it’s what’s known as a flexible ISA. Among the benefits, this allows you to replace the amount you withdraw in the same tax year without it reducing your £20,000 annual ISA subscription allowance. Not all ISAs are flexible. Please note: in order to make a withdrawal from the Courtiers ISA it will be necessary to liquidate i.e. sell the investments first.

Many stocks and shares ISAs and SIPPs are self-managed, giving people the freedom to make and manage their own investments without any financial advice. While this suits many people, switching to Courtiers means that clients have the option of having their investments managed as part of its Discretionary Investment Management service. They can also benefit from Courtiers’ Ongoing Financial Planning service delivered through their own personal Adviser.