Pension or ISA?

spartacus173500

I currently have circa £50k in a Halifax ISA @ 1.5%.

I can contribute further £35k nett into a Stakeholder Pension (AEGON) after Employer/Employee NHS pension contribution upto current year earnings

Current Stakeholder Pension with AEGON, circa £250k, has forecast based on retirement age at 65.
I will want to take tax free lump sum later this year at 60.

Is payment using ISA savings a good idea?
I think so - looking for confirmation or alternative strategy.

Should I stick with AEGON (SE Universal 2020 Fund)?

Thx

kidmugsy

What is your present rate of income tax? What will it be when you retire?

jamesd

Yes, payment using ISA funds is a good idea. It's something that I may well end up doing in the coming tax year as I get closer to 55.

Use caution with the Universal 2020 fund because it's designed for those who plan to spend their pension pot on an annuity in 2020. So it will move from equities into fixed interest starting six years before then: meaning it's already started doing that. Their choice of annuity fund is particularly horrendous: a long gilt fund, the type that will suffer most as interest rates rise. Good for annuity matching, bad for investing.

So I suggest moving all of your money out of that fund. If you're happy paying 1% charge for a combination of mostly tracker funds you could use the same type with a different end date. Personally I don't think that's a good idea, if you're using trackers you should be paying tracker fees, not 1%. Though at least if you're paying 1% you probably aren't also paying a platform charge on top of that.

When it comes to later this year for the tax free lump sum, why not do it before 6 April 2015 so you can start capped income drawdown before it becomes unavailable to new sales on 6 April? That way you'll have the option of taking the GAD limit income level without triggering a reduction in your annual allowance from £40k to £10k. Given the amounts you might be able to make a nice profit out of taking that income and recycling it into new pension contributions. wait and taking even a penny beyond the 25% will cost you that reduced limit.

spartacus173500

kidmugsy wrote: »

What is your present rate of income tax? What will it be when you retire?

40% current, 20% at 65 based on current known pension income.

spartacus173500

When it comes to later this year for the tax free lump sum, why not do it before 6 April 2015 so you can start capped income drawdown before it becomes unavailable to new sales on 6 April?

What do i need to do?
Do i need to do this with current provider AEGON?

jamesd

You can do it with any provider where you have some pension money. To just get it done quickly you could do something like paying in £1,000 to a Hargreaves Lansdown SIPP and immediately placing it into capped drawdown. Then you can transfer elsewhere later if you want to, though check their charges.

Or it could be at Aegon, I don't know their charges and process.