Help understanding 25% tax free lump sum in pension

Pat38493

Albermarle said:

molerat said:

Depending the provider, not all have full flexibility on withdrawals, you can do pretty much whatever you want.  Take the whole 25% at once leaving the rest invested with all future withdrawals, including any growth, taxable.  Or take whatever you need whenever you want it with 25% tax free and 75% taxable.  Whatever is left invested will grow with 25% of that new amount tax free.  Remembering of course that with no relevant income you can put £2880 into a pension every year and receive a 25% uplift from the taxman.

It also possible with some providers to 
1) take the 25% tax free in stages, before taking any taxable income.
2) Take some tax free in stages and take some taxable income ( but not necessarily as a fixed 25/75  UFPLS payment) 

I don't really intend to stick it in a bank, my plan is to put it in an ISA. As far as I'm aware, there is no advantage to it being in a SIPP rather than an ISA, is there?

There is no advantage in taking it out of the SIPP and putting it in an ISA, especially if the SIPP provider is flexible in how you withdraw the tax free cash ( see above) so why bother ?

There could be some advantage for some people in this from a future tax planning point of view if for example your future withdrawals will not be even and having big spikes, or if for example you want to put some of the money in your spouse name for whatever reason.  I actually heard an IFA on an video recently saying that they sometimes advise clients to do this if the client has very large pension pots and no other savings or ISAs.  Obviously it depends on individual circumstances and plans.

On the flip side, taking the money out of the pension puts it in your estate for IHT purposes, but that wouldn't be a major factor early in retirement baring known health issues?

Also for some people it might be more tempting to spend the money quicker if it's in an ISA versus a pension.