Put More money into ISA or Pensions?

mjsmike

I am age 60 and working my wife 58 not working
We have approx 150K in various cash ISAs and 100K in my 2 pensions.
We want to retire in 2-3 years. We put most spare cash into ISAs and only £50 month into one pension.
With such low ISA interest rates should I put more money into pension? Or even transfer some ISA money into my pension? I have always thought ISAs option best as its our money and not complicated, but with low growth should I look at other low risk options.

kidmugsy

If your wife has now, and expects in future, an income below the Personal Allowance (currently £10600 p.a.) then consider contributing to a pension for her. Even if her earnings are nil, she's still allowed to contribute £3600 p.a. gross (= £2880 net). Then she can expect to withdraw the money in future tax-free.

I'd also consider moving money from your ISAs into your pensions. You will presumably want to withdraw money after you retire, and will get some or all of it tax-free. You should still be able to withdraw some of it tax-free after your State Pension begins.

Note that what you would be doing is getting tax relief on the way in (for both of you, even though your wife has no earnings) and yet avoiding tax on the way out. That's a better deal than ISAs offer.

atush

If you dont want to put all of your cash (or cant because of allwances) into pensions, id say sitting on 150K in cash at these rates is not a great thing to do.

I'd be swapping some of those ISAs into S&S isas.

And yes, 2880/3600 into a pension each year for the next 10 years will build up a nice sum to be taken tax free later for the wife.

mania112

The question you're really asking yourself isn't ISA vs Pension, it's Saving vs Investing.

You will normally make a much better return by investing, and you have a very high proportion of cash doing nothing for you.

So if you're happy to invest, this can be done either by converting some of your cash isas to stocks and shares isas or by contributing more to your pension and investing accordingly within it.

bigadaj

That £150k in cash isas isn't doing much at the moment, probably not better than 1% on average?

If your wife isn't earning currently then she has a personal allowance doing nothing, so transferring those funds into current accounts could increase returns to 3-5% for tens of thousands, read through a few threads on here about the details. Funding requirements can be recycled through the accounts monthly, so no need for an external income. Only problem might be that if she has no earnings then she may not qualify, so joint accounts may have to be used.

I'd be tempted to split the Isa money in two, half in the current accounts, and retain half wrapped in the USA but put into stocks and shares, latter requires some thoughts and research but it isn't too difficult, and you can come back with thoughts for more opinions.

Contributions in wife's pension is also a good idea.