Passive / Active investments for income.

AsifM068

To transfer my ISA to a SIPP I would have to cash out my ISA and then may have to pay more for the same funds under a SIPP I think; please correct / advise me if I'm incorrect as I am yet to explore SIPPs in any real depth.

I also thought that a defined benefit pension should not be cashed in and transferred to a SIPP as it provides for a source of lifetime income; again please point out if I am missing something.

I am entitled to a full state pension as I already have enough qualifying years according to HMRC.

AlanP_2

AsifM068 said:

To transfer my ISA to a SIPP I would have to cash out my ISA and then may have to pay more for the same funds under a SIPP I think; please correct / advise me if I'm incorrect as I am yet to explore SIPPs in any real depth.

I also thought that a defined benefit pension should not be cashed in and transferred to a SIPP as it provides for a source of lifetime income; again please point out if I am missing something.

I am entitled to a full state pension as I already have enough qualifying years according to HMRC.

First Point - Think of it more like filling the SIPP tank from the ISA tank. If you have the "spare" cash you can Buy Fund-A inside the SIPP on the same day you Sell Fund-A inside the ISA. Both trades would be at the same price so would balance each other out.

SIPP or ISA is just an administrative wrapper for tax purposes. The investment options will be the same in, for example, the Fidelity ISA or the Fidelity SIPP.

Second Point - Correct, no suggestion been made about cashing in a DB in this thread.

Third Point - Good.

Audaxer

AlanP_2 said:

AsifM068 said:

To transfer my ISA to a SIPP I would have to cash out my ISA and then may have to pay more for the same funds under a SIPP I think; please correct / advise me if I'm incorrect as I am yet to explore SIPPs in any real depth.

I also thought that a defined benefit pension should not be cashed in and transferred to a SIPP as it provides for a source of lifetime income; again please point out if I am missing something.

I am entitled to a full state pension as I already have enough qualifying years according to HMRC.

First Point - Think of it more like filling the SIPP tank from the ISA tank. If you have the "spare" cash you can Buy Fund-A inside the SIPP on the same day you Sell Fund-A inside the ISA. Both trades would be at the same price so would balance each other out.

Agree with that, and once retired and can access the SIPP, you can do the opposite and refill the ISA with the same investments. Not all at once of course.

AsifM068

Running a SIPP in parallel with an ISA when retired seems a little complicated to me and by sticking with my ISA I have near instant access to my funds / drawdown without taxes or any limits or restrictions; that seems fine to me yet I really appreciate the suggestions.

With my DB pension at 60 and with the bulk of my savings held in an ISA plus a 'cash' reserve held in premium bonds, I think / hope that financially, I will be in a fairly good position as my full state pension will also kick in at 67.

AsifM068

Slightly off tangent, but I will always be grateful that my parents encouraged me when I was 21 (now 53) to invest in an ISA with who were then Co-op / CIS, now Royal London. To be honest I did not really understand at the time what I was invested in; it was 3 equity funds, sustainable, UK and Europe where the bulk of my funds reside today.

Audaxer

AsifM068 said:

Running a SIPP in parallel with an ISA when retired seems a little complicated to me and by sticking with my ISA I have near instant access to my funds / drawdown without taxes or any limits or restrictions; that seems fine to me yet I really appreciate the suggestions.

As you are still working with 7 years to retirement, you could effectively transfer up to the equivalent of your earnings, less any other pension contributions, into a SIPP and get 25% tax relief added, assuming you are a basic rate taxpayer. If thinking of going down that route, I would just advise checking the rules to ensure you don't pay more than is allowed to reach year.

I wish that I had joined this forum and learned about this before I had already retired as once you are retired and don't have earnings, you can only add a maximum of £3,600 gross annually to a SIPP. 

AsifM068

I am not working at present and haven't done since December 2020 for I am a sole carer to a dependent.

LHW99

I am entitled to a full state pension as I already have enough qualifying years according to HMRC

Just to check - this is because you have read all of the pension forecast page?

Because depending on your work history you may need many / relatively few years for a full state pension as most people now will be under transitional rules.

AlanP_2

AsifM068 said:

I am not working at present and haven't done since December 2020 for I am a sole carer to a dependent.

No. For the next seven years until I am 60, my current investments will continue to grow through a mixture of the Vanguard Global ALL Cap Index Fund and 3 Royal London Equity funds all held within an ISA. When I am 60, I will receive my Civil Service Defined Benefit Pension which is valued at 10k p/a plus a 24K lump sum payment. This 10K I hope to supplement with a further 10k from an income generating investment from a lump sum of about 200K depending how my ISAs continue to perform for the next 7 years.  

 If from 60 you have a pension of £10k then that leaves ~ £2,570 of personal tax allowance not being used.

Why not, as a non-earner, contribute the maximum £3,600 gross (£2880 from you + HMRC top up) into a SIPP each tax year and then withdraw it to top up that £10k pension to ~£13,574 (you would only pay £26 tax on the whole lot)?

In fact, depending on any current income you could pay in the £3600 gross each year now and withdraw it all tax free a few weeks later if you have sufficient spare personal tax allowance once you get to 55. Seems a pity not to get a 25% return for minimal effort.