Paying a lump sum into my SIPP

snowcat53

I am probably missing something here but is it a good idea to put ISA savings into a pension? (leaving aside availablilty etc arguments) ..
Your ISA savings are from income that has already been taxed, and you pay no more tax on it when you spend it. But by putting it into a pension you will get the tax relief at (say) 20% but you then are taxed again on 75% of the pot when you spend it. Surely the gain is marginal?.

atush

sh856531 wrote: »

Thanks for that - I am currently about 1K short of being a higher rate payer. If I become a higher rate payer in the next year - which is possible - I doubt very much of my income will be taxed at the higher rate. I'm not too worried about the numbers involved there

Thanks!

S

Don't forget that any savings you have that are not tax protected in ISAs etc, would also be taxed at the higher rate.

So take this into acct when you are a HRTaxpayer, and pay in enough to keep yourself out of HRT althogether.

jamesd

For a basic rate tax payer you get 12% in NI. So pay in £20,000 via a salary sacrifice scheme and you save £2,400 of NI. That's serious money and you probably also get some employer NI money as well.

You get the income tax relief whether you use salary sacrifice or not but the NI saving for a basic rate tax payer is too big to ignore.

Unless your work pension scheme is truly terrible it'll be a better idea to use the work salary sacrifice scheme and use some of the ISA money to cover the living expenses that your reduced net pay can't cover.