I'm assuming this is illegal?

handful

Just for a theoretical scenario, please assume I crystallise £160k of my DC pension and take £40k TFC and that is paid into a joint account shared with my OH. I then put £20k into a S&S ISA for each of us. Would this be seen as suspicious behaviour and highly unadvisable? We treat both of our "haves" as joint so I'm not worried that this money would then legally be hers but I'm not sure whether there would be other consequences?

molerat

The money in a joint account is generally considered equally held.  You could equally pay the £40K into your own account and gift them £20K into their own account to do with as they wish.  There is no suspicious activity involved or consequences of doing this.  Technically "you" cannot pay into an ISA for "them", they would have to do it themselves.

OldMusicGuy

Nothing wrong with this, I did just this. The TFC went into our joint account and we then set up individual ISAs funded from the joint account. Once you take TFC, you can do with it what you want. 

Pat38493

I don't see anything suspicious about this at all - as far as I know there is a rule that money paid into an ISA has to come from the person's own money and not from another source, but if it's a joint account then I don't see any issue.

(There was also a recent post here where it was discussed that it's not even enforced anyway as several posters said that they had paid from their bank account into their spouses ISA (the argument being that the money was obviously gifted at the moment the payment was made).

Marcon

molerat said:

The money in a joint account is generally considered equally held.  You could equally pay the £40K into your own account and gift them £20K into their own account to do with as they wish.  There is no suspicious activity involved or consequences of doing this.  Technically "you" cannot pay into an ISA for "them", they would have to do it themselves.

Pat38493 said:

I don't see anything suspicious about this at all - as far as I know there is a rule that money paid into an ISA has to come from the person's own money and not from another source, but if it's a joint account then I don't see any issue.

 Third parties can pay into someone else's ISA eg https://www.fidelity.co.uk/stocks-and-shares-isa-faq/#2913887 

'As a third party, you are allowed to contribute to an ISA for someone else.'

The £20K annual limit applies to the ISA owner, regardless of the source of funds.

handful

Thanks all, I had an a inkling that you shouldn't pay your own cash into another person's ISA but as long as that is circumvented by doing it from a joint account then all seems well. This seems like it would be a more tax efficient way of getting as much money as possible out of my pension and into another tax free wrapper and then draw the crystallised fund out up to the PA limit each year until SP starts. The only negative that seems obvious to me is the IHT risk. Unless I'm missing something else?

Dazed_and_C0nfused

handful said:

Thanks all, I had an a inkling that you shouldn't pay your own cash into another person's ISA but as long as that is circumvented by doing it from a joint account then all seems well. This seems like it would be a more tax efficient way of getting as much money as possible out of my pension and into another tax free wrapper and then draw the crystallised fund out up to the PA limit each year until SP starts. The only negative that seems obvious to me is the IHT risk. Unless I'm missing something else?

It's no longer your money.

You may be confident they won't do this but if your OH wants to take the money out of the ISA and spend it that's their choice.

Marcon

handful said:

Thanks all, I had an a inkling that you shouldn't pay your own cash into another person's ISA but as long as that is circumvented by doing it from a joint account then all seems well

You don't need to circumvent it at all, since it's fine to do it, unless you are using a provider which for some reason precludes third party contributions. 

poto

Don't think that is illegal at all, but honestly what's the point of the transfer? What are you gaining from that?

Universidad

OldMusicGuy said:

Once you take TFC, you can do with it what you want. 

Apart from putting it back into a pension scheme... (subject to certain limits)

handful

poto said:

Don't think that is illegal at all, but honestly what's the point of the transfer? What are you gaining from that?

My thinking is that once SP kicks in, everything apart from TFC is taxable but if I leave it until then I would have more than my ISA allowance to put away into another tax free umbrella. Using the OHs ISA allowance would give me somewhere else to put it that wouldn't be subject to tax. So basically, get as much out of the SIPP without paying tax either before or after withdrawing it.