Dad and his retirement money

ed67812

After I've had some very helpful input on another question, I thought that I would ask this here.

My Mum and Dad are in their early sixties. Mum has a small, but sufficient, pension through employment by the LA in eduction.

My Dad does not have a pension. He has saved about £100k, mainly in a stocks/shares isa. To be honest, given that they have both only ever had low paid work, have had little inheritance and had to raise two expensive sons, they've done well to own a relatively expensive house outright and have any savings at all.

Looking into my own pension got me thinking that Dad has missed out on tax relief. Would he have been better off saving the money that he has put into his ISA into a pension pot given that it would be increased by 20%. Any annuity he purchased would be at such a level that he would unlikely pay income tax on the annual pension.


As he doesn't intend to retire for as long as his (currently strong and healthy) body allows, could he now move the ISA funds into a pension pot and claim income tax relief. Effectively topping the pot up?

Thanks

kidmugsy

Yes; good plan. He might want to get a wiggle on or risk losing his 2014-15 opportunity.

xylophone

He can pay up to his earned income into a pension this tax year and subsequently.


https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief


http://www.hl.co.uk/pensions/interactive-calculators/tax-relief-calculator

atush

yes a pension could give him some advantage if he is still working.

Thru both tax relief as described and perhaps deferring his state pension when due?

jamesd

Yes, he's missed a major good thing. He should move that money into a pension as fast as the annual limits allow.

He doesn't have to buy an annuity and he'd be a fool to buy one given his age. Deferring claiming the state pension will get him an increase of 5.8% inflation-linked for each year he defers. That's way more than comparable annuities would pay him.

Your mum could do the same when it comes to deferring the state pension to increase hers. Him first because he has more unused personal allowance and she might have none unused, but both combined deferring can quite quickly generate a nice increase in their combined income.