LGPS OAP & ISA ?

RULAST

Older family member soon to be an OAP. They're a part of LGPS pension scheme which by default pays a lump sum at same retirement date as OAP starts. Can I ask if they could transfer some of the small LGPS to a simple ISA or am I right in reading that tax free lump sums can't go to a tax free ISA (as advertised as 20k tax free per annum already). Similarly can OAPs put bits and bobs of OAP in to little ISA.. or whatever left after rising cost shopping and energy costs paid!

Dazed_and_C0nfused

RULAST said:

Older family member soon to be an OAP. They're a part of LGPS pension scheme which by default pays a lump sum at same retirement date as OAP starts. Can I ask if they could transfer some of the small LGPS to a simple ISA or am I right in reading that tax free lump sums can't go to a tax free ISA (as advertised as 20k tax free per annum already). Similarly can OAPs put bits and bobs of OAP in to little ISA.. or whatever left after rising cost shopping and energy costs paid!

Where have you read that 🤔

xylophone

There is no law against your relative's using the lump sum from his LGPS pension to contribute to an ISA or to his making  contributions to an ISA from his state or LGPS pensions.

https://www.thisismoney.co.uk/money/saving/article-1583864/Best-savings-rates-Isas-Cash-Isa-accounts-fixed-rate-Isas.html

He can contribute up to £20,000 before 6 April. 

He can contribute up to another £20,000 between 6 April and 5 April 2025.

[Deleted User]

The term OAP is rather outdated these says. I will start receiving my state pension in July. I would probably thump someone who called me an OAP lol. Sixty six isn't old these days.

I thoroughly dislike the assumption that older people can't do digital! I have to say that some older people are most to blame for this fallacy too.

My mother is 84 does all her booking online, shops on the internet follows social media. Absolute dab hand with her smart phone too.

My grandma was 102 when she died but still had her online banking service!

Apologies for going off track it was that OAP phrase lol!

Sarahspangles

RULAST said:

Older family member soon to be an OAP. They're a part of LGPS pension scheme which by default pays a lump sum at same retirement date as OAP starts. Can I ask if they could transfer some of the small LGPS to a simple ISA or am I right in reading that tax free lump sums can't go to a tax free ISA (as advertised as 20k tax free per annum already). Similarly can OAPs put bits and bobs of OAP in to little ISA.. or whatever left after rising cost shopping and energy costs paid!

What your relative can’t do - in theory - is recycle their Pension Commencement Lump Sum (that’s what it’s called) back into a pension, because that would be getting another bite of the tax-relief-on-pension-contributions cherry.  Maybe that’s what you/they were thinking of. I say in theory because it’s allowed with small amounts and there’s no knowledge of anyone ever getting into trouble for doing it.

But another pension is probably not a priority in any case. People often save it, an ISA is fine. I know people often spend it on something that will save money long term like replacing an inefficient boiler or downsizing their car. My OH’s priority was buying more mountain bikes - he also objects to being called a pensioner.

RULAST

Thankyou SarahSpangles. This makes it clearer and I've informeded them on your comment. They send thanks. Maybe I didn't help and was getting muddled on pension v savings(ISA). I do have a question in my head that asks why Martin/MSE (on TV etc) are saying open an ISA now before April this year?. So does it mean I myself could put example £2k pounds in a simple ISA now/today and get the interest (about1.5%) all paid out tax free at the start of the new tax year starting very soon in April??. That sounds cool as my little bank saver account pays 1.4% and gets taxed as well. Am I understanding it correct regarding Martin comment?

RULAST

Sarahspangles said:

RULAST said:

Older family member soon to be an OAP. They're a part of LGPS pension scheme which by default pays a lump sum at same retirement date as OAP starts. Can I ask if they could transfer some of the small LGPS to a simple ISA or am I right in reading that tax free lump sums can't go to a tax free ISA (as advertised as 20k tax free per annum already). Similarly can OAPs put bits and bobs of OAP in to little ISA.. or whatever left after rising cost shopping and energy costs paid!

What your relative can’t do - in theory - is recycle their Pension Commencement Lump Sum (that’s what it’s called) back into a pension, because that would be getting another bite of the tax-relief-on-pension-contributions cherry.  Maybe that’s what you/they were thinking of. I say in theory because it’s allowed with small amounts and there’s no knowledge of anyone ever getting into trouble for doing it.

But another pension is probably not a priority in any case. People often save it, an ISA is fine. I know people often spend it on something that will save money long term like replacing an inefficient boiler or downsizing their car. My OH’s priority was buying more mountain bikes - he also objects to being called a pensioner.

Does it mean putting 2000 in isa before new tax year won't get factored in to new tax allowances?. Surely I won't get full 1 year tax free interest for a couple of days of it being in the isa?.. Am I right ref this above please?.. Don't understand the rush and why couldn't be done in a couple of weeks time?. Martin obviously said for a reason.. Sorry to be ignorant..

Newly_retired

 Savers can put only £20,000 into an ISA each tax year. It is a case of use it ( your allowance ) or lose it. Hence the rush.  When the new tax year starts, you have a new £20,000 allowance.

amanda1024

RULAST said:

Sarahspangles said:

RULAST said:

Older family member soon to be an OAP. They're a part of LGPS pension scheme which by default pays a lump sum at same retirement date as OAP starts. Can I ask if they could transfer some of the small LGPS to a simple ISA or am I right in reading that tax free lump sums can't go to a tax free ISA (as advertised as 20k tax free per annum already). Similarly can OAPs put bits and bobs of OAP in to little ISA.. or whatever left after rising cost shopping and energy costs paid!

What your relative can’t do - in theory - is recycle their Pension Commencement Lump Sum (that’s what it’s called) back into a pension, because that would be getting another bite of the tax-relief-on-pension-contributions cherry.  Maybe that’s what you/they were thinking of. I say in theory because it’s allowed with small amounts and there’s no knowledge of anyone ever getting into trouble for doing it.

But another pension is probably not a priority in any case. People often save it, an ISA is fine. I know people often spend it on something that will save money long term like replacing an inefficient boiler or downsizing their car. My OH’s priority was buying more mountain bikes - he also objects to being called a pensioner.

Does it mean putting 2000 in isa before new tax year won't get factored in to new tax allowances?. Surely I won't get full 1 year tax free interest for a couple of days of it being in the isa?.. Am I right ref this above please?.. Don't understand the rush and why couldn't be done in a couple of weeks time?. Martin obviously said for a reason.. Sorry to be ignorant..

Each person is allowed to put up to £20k into ISAs each tax year. The allowance doesn’t carry over. So if someone was anticipating maxing out the £20k allowance next year, they should make sure to use this year’s allowance by 5th April. If you’re not hitting the limit anyway there’s no rush.

The interest on ISAs works the same as other savings accounts - there’s the same choice of easy access accounts, fixed rate accounts, some which pay interest monthly, annually or on maturity. Generally the interest is calculated daily (taking the annual interest rate and dividing by 365 or 366), so if you only have money in for less than a year you’d get a proportion.

As an aside, there are both ISAs and non-ISA accounts that pay a lot higher than 1.4%!

RULAST

Newly_retired said:

 Savers can put only £20,000 into an ISA each tax year. It is a case of use it ( your allowance ) or lose it. Hence the rush.  When the new tax year starts, you have a new £20,000 allowance.

Ah thanks... that's a very clear explanation for idiot like me!. Thanks so much 👍

Sarahspangles

RULAST said:

Thankyou SarahSpangles. This makes it clearer and I've informeded them on your comment. They send thanks. Maybe I didn't help and was getting muddled on pension v savings(ISA). I do have a question in my head that asks why Martin/MSE (on TV etc) are saying open an ISA now before April this year?. So does it mean I myself could put example £2k pounds in a simple ISA now/today and get the interest (about1.5%) all paid out tax free at the start of the new tax year starting very soon in April??. That sounds cool as my little bank saver account pays 1.4% and gets taxed as well. Am I understanding it correct regarding Martin comment?

I’m glad it helped.

No, Martin is encouraging people to open an ISA now because we’re allowed to save up to £20,000 each year, and the year ‘resets’ from 6th April the first day of the new tax year. So if you have lots to save, putting some in this week, and some after 6th April shelters more of your savings from tax.

But if you save £2,000 today most ISA’s will pay your interest into the account on 30th March 2025.

However you can definitely beat 1.4%, and you may not even be paying tax on that as most people can earn £1,000 in savings interest.

If your savings aren’t large, there are regular saver accounts where you pay a bit in every month, that offer over 5% a year. High Street banks like Halifax are included.

If you need to avoid paying tax, there are easy-access ISAs like the Post Office’s that pay 4.9% but that one’s online.