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SIPP, ISA or ?

Hi All, could you clever folks advise what the best vehical I should be holding money in, I presently have a drawdown SIPP, ( 12k cash and 25k Shares) I am taking a monthly drawdown at 11.5k div 12mths. As I am recieving 'zip' interest on the cash ( HL) is there any benefit in opening an ISA or is the amount too small and obviously steadily decreasing.

Once the above funds are exhausted I intend to access my DB pension @ 21k/yr +30k TFL, again I need homes for this.

Any help gratefully accepted

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  • bowlhead99bowlhead99 Forumite
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    Hi All, could you clever folks advise what the best vehical I should be holding money in, I presently have a drawdown SIPP, ( 12k cash and 25k Shares) I am taking a monthly drawdown at 11.5k div 12mths. As I am recieving 'zip' interest on the cash ( HL) is there any benefit in opening an ISA or is the amount too small and obviously steadily decreasing.
    Are you taking the money out because you need to spend it? Or just to get it out of the pension before it grows too much, so that you can invest it in an S&S ISA or high interest bank accounts instead?

    Is the 11.5k to fit within your annual allowance and implying you don't have any other income at the moment, or is that just coincidence and you're really a high rate taxpayer?

    One sensible use for the money that you take out over the coming months would be to use some of it to fund further pension contributions (which would be restricted to a maximum amount of £3600 a year if you don't have any earned income any more, but a higher number if you do). Up to your relevant annual limit, the more contributions you make, the more tax relief you get

    Once the above funds are exhausted I intend to access my DB pension @ 21k/yr +30k TFL, again I need homes for this.
    At the rate you're "exhausting" your £37k of funds it sounds like it could be at least three years away (depending on the performance of your equities, which is an unknown). The best "home" for your lump sum and pension income will therefore depend on what's on offer in around three years and how much of it you are actually going to need/want to live on.

    However, the fact that it is going to be money that "needs a home" rather than money you'll be spending, implies that you are not living hand to mouth and it will form a decent emergency fund, safety buffer etc. So, if that means you are willing to take investment risk, the money you're currently pulling out of the pension might as well be going into investment options such as S&S ISA rather than cash (apart from whatever portion of it you recycle back into the SIPP for more tax relief).

    If the cash in your SIPP is being drawn at £11.5k a year in small monthly chunks, but is paying zero interest while it sits in cash waiting to be drawn, it seems pretty inefficient to take 12 months to draw it. If you want to be in cash, and they pay zero on cash, why not just draw £11.5k in the first month of the tax year and then zero in the next eleven months, meanwhile putting the money in high interest non-SIPP bank accounts? Or S&S ISA if you want investment risk over the longer term.
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