ISA v SIPP

jim8888

I was looking for some advice given the recent spurt in equity markets. I’ve got a near six figure sum in ISA's invested 100% across various equity markets. I’ve also got a small SIPP that I had to take a few years ago when a company pension scheme was folded and I had to transfer the money out it and into my own scheme.
I’m thinking of cashing in some of my investments and putting it into my SIPP to get the tax relief. As a higher rate payer I should be due 40%.
I’m thinking of putting in possibly 50k. I am aware of the annual allowance, but I was unemployed last year and didn’t make any contributions into my SIPP or any other scheme so I think I’m allowed to carry forward the unused allowance from that year? (I’m back in employment now with another company pension, and I believe I could also contribute into that as opposed to the SIPP.)
If I was allowed to do this, I think I’d put in the 50k which would be grossed up by 20% to 60k? I’d then have to claim back the other 20% on this contribution (10k) via my tax return.
I'm fifty two years old and thinking of taking my SIPP at 55.
Is my thinking correct in this? Any pitfalls I should be aware of? The one thing I probably need to calculate is the fact that all my ISA investments are tax free whereas only 25% of anything coming out the SIPP will be, and the rest will potentially be taxed.
On the other hand, boosting a 50k investment by 20k seems quite attractive proposition.
I'd appreciate any advice or thoughts on this.

xylophone

http://www.hl.co.uk/pensions/sipp/pension-carry-forward

AlanP_2

Pension contributions, within annual limit including carry forward, are capped at earned income in tax year which may stop you putting the full £50k in this year.

maximumgardener

Thing is its probably seldom a pure case of isa vs sipp ?
will depend on your own circumstanced of course.

perhaps a blend of S&S isa's / Personal Pensions / Cash ......is the way to go?

perhaps 60% S&S isa's / 25 % Personal Pensions / 15% Cash OR

alternatively 50% S&S isa's / 33% Personal Pensions /17% cash

thing is the isa's and Pension money can be invested in a range of investments according to your risk profile.....of course the isa 's are tax free on withdrawal, hence load up on that

al lot will depend on your tax position from 55 onwards and at what point you wish to draw on SIPP funds

AnotherJoe

Given your age (only 3 years off being able to take it) and being a HRT I agree it's close to a no brainer to put the money in a SIPP. You may even be able to transfer the investments directly with the right provider. I think you can with HL for example.

Note that the way the tax relief works is you actually get 25% added not 20% . Eg put £8k in get £2k added and then get £2k back from tax man later. So it's only cost you £6k to get £10k. When you withdraw the £10k you'd get £2,500tax free and pay 20% on the £7,500 (assuming you aren't HRT in withdrawal). So that's a free £2500 on top of your £6,000. As long as you don't mind waiting for it, that's the downside, it's locked up

I can't help on carry forward that always seems complex to me.