Fixed bond ISA advise please! 6 December 2022 at 8:12PM in Savings & investments 6 replies 182 views

Darnhall

I currently have approx 12k in a fixed 2yr bond ISA this tax year (2022/2023) with Kent Reliance at a rate of 4.40%.
Should I consider pulling £8k (tax free) from my pension, to maximise my ISA limit?

Like everyone else, my pension pot has significantly dropped over the past 18 months, so wondering if this is worthwhile?

I’m 59 and still working by the way.
any advice will be appreciated. 

El_Torro

Have you ever taken money out of your pension? If not then you need to be aware that you will be limited by how much you can pay into it, once you take any amount out. Have a look at the rules for MPAA (Money Purchase Annual Allowance) and decide then if it is worth it. 

If you don't plan to retire soon then it sounds to me like this is a bad idea. Sure, stock market values have taken a hit this year, that is to be expected from time to time though. 

Darnhall

El_Torro said:

Have you ever taken money out of your pension? If not then you need to be aware that you will be limited by how much you can pay into it, once you take any amount out. Have a look at the rules for MPAA (Money Purchase Annual Allowance) and decide then if it is worth it. 

If you don't plan to retire soon then it sounds to me like this is a bad idea. Sure, stock market values have taken a hit this year, that is to be expected from time to time though. 

Thank you so much for this. 

No, I haven’t taken any money out so far. I’m just conscious that at 55 I can start taking money out.
live taken a 30% (or so) hit on my pension pot over the past 18 months, so thought it might be a good idea to release a small amount and maximise my ISA, at a guaranteed % rate. 

Darnhall

Oh and I, planning to retire at 65. 

Darnhall

Oh and I’m planning to retire at 65. 

El_Torro

As usual nobody knows what pension funds / stock markets will do over the next 6 years. There's an argument to say that since they've taken a hit this year now is a good time to see them recover. Of course they might drop further, we just don't know. I personally wouldn't be chasing 4.4% per year for 2 years in a fixed rate cash ISA, I expect shares to grow faster than that. And that's before worrying about the tax implications of MPAA. 

Do you have a plan for your pension when you do retire? Will you take the full tax free allowance? Have you already started moving at least some of your pension to more cautious funds? Are you building a cash buffer (assuming you're not buying an annuity)? I would focus my concerns here rather than trying to chase cash ISA rates.

Darnhall

El_Torro said:

As usual nobody knows what pension funds / stock markets will do over the next 6 years. There's an argument to say that since they've taken a hit this year now is a good time to see them recover. Of course they might drop further, we just don't know. I personally wouldn't be chasing 4.4% per year for 2 years in a fixed rate cash ISA, I expect shares to grow faster than that. And that's before worrying about the tax implications of MPAA. 

Do you have a plan for your pension when you do retire? Will you take the full tax free allowance? Have you already started moving at least some of your pension to more cautious funds? Are you building a cash buffer (assuming you're not buying an annuity)? I would focus my concerns here rather than trying to chase cash ISA rates.

I’ll take your advice and leave my pension pot intact.
seeing £45k literally disappear has made me very nervous, but hopefully there’ll be a resurgence in the future. As you say, I have 5-6 years for it to recover.