USE OF PENSION LUMP SUM TO INVEST IN ISAs

Evening

I have recently retired and as well as an annual pension have received a lump sum in excess of £100k. The lump sum currently sits temporarily in an instant access bank account held jointly by myself and my wife.

My wife and I have yet to use our respective ISA allowances for 2023/2024 and of course will have allowances available to us for 2024/2025 in due course.

We are considering utilising those allowances with some of the lump sum I received. Is it permissible for us to use some of that lump sum given it was awarded to me toward utilising both mine and my wife's ISA allowance or would that be considered to be some sort tax dodge?

Thanks.


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  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 12,668
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    Moots2024 said:
    Evening

    I have recently retired and as well as an annual pension have received a lump sum in excess of £100k. The lump sum currently sits temporarily in an instant access bank account held jointly by myself and my wife.

    My wife and I have yet to use our respective ISA allowances for 2023/2024 and of course will have allowances available to us for 2024/2025 in due course.

    We are considering utilising those allowances with some of the lump sum I received. Is it permissible for us to use some of that lump sum given it was awarded to me toward utilising both mine and my wife's ISA allowance or would that be considered to be some sort tax dodge?

    Thanks.


    If you choose to gift £40k to your wife then that's your choice.

    But she is perfectly entitled to do what she wants with it.  Be that leave it in the ISA, take it out and buy a Ferrari or blow it on the 2:30 at Cheltenham!
  • eskbanker
    eskbanker Posts: 29,763
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    edited 30 January at 7:22PM
    You're entitled to give her money without tax implications and once it's hers then she can choose to do what she likes with it.
  • Moots2024
    Moots2024 Posts: 7
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    Thanks Dazed_and_C0nfused

    Unfortunately it's me that wants to buy the Ferrari and/or blow it on the 2:30 at Cheltenham but I need to weigh up that against the future of my marriage ;-)

  • eskbanker
    eskbanker Posts: 29,763
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    Moots2024 said:
    it's me that wants to buy the Ferrari
    Just as well it's your six-figure sum then, as nobody would want to be seen in a £40K Ferrari, if such a thing exists ;)
  • boingy
    boingy Posts: 1,137
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    As stated above it's definitely not a tax dodge and it is a good idea. Depending upon your other assets you might want to consider putting some in a Stocks and Shares ISA rather than a cash ISA. It depends on your risk profile and how much other cash and "safe" investments you have.

    I've been putting some of my tax-free pension lump into an S&S ISA and investing in the same funds that are in the pension!


  • dunstonh
    dunstonh Posts: 115,606
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    I've been putting some of my tax-free pension lump into an S&S ISA and investing in the same funds that are in the pension!
    Have you been funding the pension to the maximum as well as the pension wrapper beats the ISA wrapper unless you are maximised?

    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • boingy
    boingy Posts: 1,137
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    dunstonh said:
    I've been putting some of my tax-free pension lump into an S&S ISA and investing in the same funds that are in the pension!
    Have you been funding the pension to the maximum as well as the pension wrapper beats the ISA wrapper unless you are maximised?

    Or unless I am in drawdown.
  • dunstonh
    dunstonh Posts: 115,606
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    boingy said:
    dunstonh said:
    I've been putting some of my tax-free pension lump into an S&S ISA and investing in the same funds that are in the pension!
    Have you been funding the pension to the maximum as well as the pension wrapper beats the ISA wrapper unless you are maximised?

    Or unless I am in drawdown.
    Why would that stop you paying into a pension?
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Superdude0499
    Superdude0499 Posts: 24
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    If only income is from lump sum and drawdown would that be considered recycling?
  • eskbanker
    eskbanker Posts: 29,763
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    If only income is from lump sum and drawdown would that be considered recycling?
    Not a simple yes/no answer to that, but it might be, if meeting the criteria shown at:

    https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm133810
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