I don't really need my pension yet.

clive0510

All I really want to know is am I best off investing my inheritance and drawing my pension now. or the other way round. ie is it better to leave the pension where it is, and live off my inheritance?

LHW99

With the reductions in personal savings allowance and capital gains tax allowance, and the fact you can only put £20k pa in an ISA, it may well be worth runnung down the inheritance money, at least until you get to the point where you have it all / most in tax sheltered accounts. As said, this year you would probably also be able to put more than the non-earner's allowance (£2880) into the pension, where it is tax sheltered until withdrawal, and doesn't get counted in your estate at death.

Albermarle

clive0510 said:

All I really want to know is am I best off investing my inheritance and drawing my pension now. or the other way round. ie is it better to leave the pension where it is, and live off my inheritance?

OP,
There seems to be some facts missing.
Some of the posters have assumed you have stopped work entirely, but you only said you have stopped full time employment, but there seems to be some indication you will still be working . Is that correct or not ?

You have only mentioned your personal pension, but what about your pension connected to your full time employment? Do you not have one ?

Qyburn

clive0510 said:

All I really want to know is am I best off investing my inheritance and drawing my pension now. or the other way round. ie is it better to leave the pension where it is, and live off my inheritance?

Between those two all or nothing options the best is likely to be the second one.
(1) You may end up paying tax on returns from investing the inheritance, whereas your pension investment aren't taxed until you start drawing it.
(2) Depending on how much you need each year, you may be taxed on pension income (if it's over around £16,500 per year). You won't pay tax spending the inheritance.

squirrelpie

If you invest your inheritance, you will pay tax on whatever it earns. Unless and until you can move it into a tax shelter such as a pension or an ISA. So if you have inherited enough (1) to live on this year, plus some extra, then (2) consider paying some of the inheritance into your pension, and if there's still some left (3) pay some (up to £20,000) into an ISA. Repeat the ISA next year if there's any left.

clive0510

Albermarle said:

clive0510 said:

All I really want to know is am I best off investing my inheritance and drawing my pension now. or the other way round. ie is it better to leave the pension where it is, and live off my inheritance?

OP,
There seems to be some facts missing.
Some of the posters have assumed you have stopped work entirely, but you only said you have stopped full time employment, but there seems to be some indication you will still be working . Is that correct or not ?

You have only mentioned your personal pension, but what about your pension connected to your full time employment? Do you not have one ?

hi. I am stopping work completely as financially I don't need it any more. 
besides my p/p I have a work place pension, which has been in place since they were made compulsory about 8 yrs ago.

Dazed_and_C0nfused

LHW99 said:

With the reductions in personal savings allowance and capital gains tax allowance, and the fact you can only put £20k pa in an ISA, it may well be worth runnung down the inheritance money, at least until you get to the point where you have it all / most in tax sheltered accounts. As said, this year you would probably also be able to put more than the non-earner's allowance (£2880) into the pension, where it is tax sheltered until withdrawal, and doesn't get counted in your estate at death.

Are you Jeremy Hunt testing the water for 22 November 🤔

Albermarle

clive0510 said:

Albermarle said:

clive0510 said:

All I really want to know is am I best off investing my inheritance and drawing my pension now. or the other way round. ie is it better to leave the pension where it is, and live off my inheritance?

OP,
There seems to be some facts missing.
Some of the posters have assumed you have stopped work entirely, but you only said you have stopped full time employment, but there seems to be some indication you will still be working . Is that correct or not ?

You have only mentioned your personal pension, but what about your pension connected to your full time employment? Do you not have one ?

hi. I am stopping work completely as financially I don't need it any more. 
besides my p/p I have a work place pension, which has been in place since they were made compulsory about 8 yrs ago.

So you have to think about what to do with both pensions, not just one in isolation.
Maybe you could transfer the ex workplace one into your PP ( or vice versa) , as it might make it easier to plan. Transferring these sorts of pensions is relatively easy .

Otherwise as already mentioned you should make sure you use your personal tax allowance ( £12570) each tax year.
You probably have used it up this year as your were working for 7 months of the tax year.
But next tax year you can take a UFPLS payment from your pension of £16,760 and pay no tax assuming you have no other taxable income.
This consists of £4190 of tax free cash and £12,570 of taxable income, but you will not pay any tax on it as it is within your personal allowance.
If you only use up your inheritance and do no take the above for the next 7 years until your SP arrives, you will waste your personal tax allowance each year.

So you could take this amount from the pension and top it up with money from the house sale.

Probably a chat with Pension Wise is a good idea.
Pension Wise: free pension guidance | MoneyHelper

I have made sufficient ni contributions for when my state pension comes out in 7 yrs time. so do I stop paying ni contributions now? or will my employer sort that out. 

You do not have an employer anymore, so no more NI will be paid.

clive0510

so on the question of isa's, is it correct that you can invest 20k before april 5th, and then another 20k in either the same isa or maybe a different one, after april 5th. and that way avoid the taxman on all of it?

Dazed_and_C0nfused

clive0510 said:

so on the question of isa's, is it correct that you can invest 20k before april 5th, and then another 20k in either the same isa or maybe a different one, after april 5th. and that way avoid the taxman on all of it?

ISA's don't avoid tax until the money is within the ISA wrapper.

Say you earn £20k and put it all in an ISA.  The £20k is still taxable income and you will be liable to tax on it 

But once in the wrapper any interest, divided or capital appreciation is exempt from tax.