We'd like to remind Forumites to please avoid political debate on the Forum. This is to keep it a safe and useful space for MoneySaving discussions. Threads that are - or become - political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
We're aware that dates on the Forum are not currently showing correctly. Please bear with us while we get this fixed, and see Site feedback for updates.
Using isa allowance

Kim1965
Posts: 550 Forumite

59 working ft for perhaps 2 yrs, then happy to work pt to spa. im putting as much as i can into pensions. Already have db of 9kpa in payment. I have 100k in isa/inherited pension where any withdrawals are tax free. 180k in a sipp. Core spending 21k pa.
Is there any merit in crystallising parts of my pension and moving 20k a yr into my isa to use my isa allowance? . Both have the same investment mainly equities. My thinking is that i will save tax. Is there any advantage of using ufplus instead?
Is there any merit in crystallising parts of my pension and moving 20k a yr into my isa to use my isa allowance? . Both have the same investment mainly equities. My thinking is that i will save tax. Is there any advantage of using ufplus instead?
0
Comments
-
Are you likely to have any unused personal tax allowance in the years leading up to SPA? If so, then pension drawdowns to use that up are likely to be beneficial, but if not, then I'm not seeing the inherent tax benefit of moving funds from pension to ISA, as 75% would be taxed at your marginal rate whenever you do it?0
-
eskbanker said:Are you likely to have any unused personal tax allowance in the years leading up to SPA? If so, then pension drawdowns to use that up are likely to be beneficial, but if not, then I'm not seeing the inherent tax benefit of moving funds from pension to ISA, as 75% would be taxed at your marginal rate whenever you do it?
The inherited pension will stay where it is. Its my sipp that im thinking should be shifted to isa, because at spa i will have full sp 11.5 k, 9k db, so im cannot avoid paying tax. Income from isa/inherited pension will be tax free, but my sipp i will pay tax on income above the tax free lump sum.
Im just mulling whether moving money via the tax free element if my sipp into my isa is advantageous over ufplus?0 -
There are various pros and cons between the different methods of accessing pensions but from a tax perspective you'll effectively be paying 15% whichever you choose?0
-
Kim1965 said:... im putting as much as i can into pensions. ...
a) there's £400 left at the end of the month, so you are saving £400/mth into your pension, or
b) you are putting every last penny of your salary into your pension, and living off the DB and your savings?
Because the answer should be b. Do it right, and you get 20% tax rebate for paying into the pension. When you eventually take it out, you only pay 15% tax because of the 1/4 tax free.
So taking pension out and putting it into ISA is backwards. Also, if you take any taxable money from a DC pension you can then only put in 10k per year thereafter, including employer's contribution.
You are at an age where, if you really need some money, you can get it out from your pension. You are heading into retirement. You should be putting as much as you are allowed into your pension.
0 -
The only real advantages I can think of to move your tax free lump sum out of the pension are
a) speed of access - it is probably slightly quicker to access investments in ISAs vs Pensions as there is less red tape.b) protecting against government pension law changes - like putting a lower limit on the max PCLS
Disadvantages are
a) loss of IHT protection and under 75 death tax free advantage. Plus not sure what happens if you die after 75 - whether the 25% tax free part is still tax free for the beneficiary.
b) extra red tape required means pension assets probably slightly safer from fraud,
c) assets still in pension has some advantages in terms of eligibility checks for means tested benefits,
d) finally as per b) in the advantages - future governments might make ISA investment tax benefits worse than pensions.0 -
All agreed ukdw. To add:
If you needed access to a very large sum, you could get it all out of ISA's with no tax to pay. Taking it from your pension might result in a tax bill.
Some people might prefer to have the money in their estate than in their pension. If you are not going to be paying IHT, there is no harm in this. Within your estate you have absolute control as to how the money will be distributed after you die. Pension payout is in the hands of trustees who might not be willing to give it all to the dogs' home.
To address your point a), beyond age 75 the 25% tax free is lost. The recipient will pay tax on money when they withdraw it as if it was earnings. So for some people it will make sense to pull out what's left of your 25% when you hit 75.0 -
Ok thanks for the comments. I am putting almost everything i earn through my pension, living off db and cash savings.
With a property value of 340k (think i get my late wifes iht allowance) and currently about 300k in pension/ isa, I think Iht is not an issue.
Whats confusing me is that at retirement age 67, i will be paying tax on income from my pension, and not from isa. Sounds that there is no real benefit from putting the 25%tfls into the isa?0 -
Kim1965 said:Whats confusing me is that at retirement age 67, i will be paying tax on income from my pension, and not from isa. Sounds that there is no real benefit from putting the 25%tfls into the isa?
Once you've withdrawn money from a pension and are holding a cash pot then it makes more sense to use an ISA than a taxable account, but that's essentially a different issue.0 -
My sipp is with hl. So if i dont take the 25%ls at spa (i dont need a lump sum) but take 8k pa, im guessing i would only be taxed on 6k of it?0
Confirm your email address to Create Threads and Reply

Categories
- All Categories
- 348.4K Banking & Borrowing
- 252.2K Reduce Debt & Boost Income
- 452.5K Spending & Discounts
- 241K Work, Benefits & Business
- 617.4K Mortgages, Homes & Bills
- 175.7K Life & Family
- 254.2K Travel & Transport
- 1.5M Hobbies & Leisure
- 16K Discuss & Feedback
- 15.1K Coronavirus Support Boards