How do I transfer my ISA into my workplace pension?

Soledad19

Hello,
I have an ISA that I want to close and transfer the money to top my workplace pension, but I'm wondering how would I do practically?
I'm 58, basic tax rate payer, and I understand this operation would be classed as paying a lump-sum contribution to my Fidelity pension scheme.
But how do I do that practically? And would I have to pay taxes?
Thanks to anyone able to answer....

Albermarle

You withdraw the money from the ISA to your bank account and then add it to your pension.
No tax implications. Only issue is that like with all your pension contributions, you need to have enough earned income to get the tax relief.

El_Torro

Assuming you have enough taxable earnings to make the contribution and still get tax relief (you can make a contribution without tax relief, but there isn’t much point in doing that) then it’s pretty straightforward. Just remove the cash from your ISA, into your current account presumably, then make a payment into your pension. 

Money removed from an ISA is not taxable. Any interest you make on the money once it is no longer in the ISA is taxable. Once the money is in your pension there are no taxes to pay, only when you remove money from your pension. You might even get a tax rebate from HMRC, if you are a higher rate tax payer. 

Soledad19

Thank you both. I'm on a £51k salary and I have paid £7964 in taxes last year, I have no other income.... Do I get a tax rebate?? 

Marcon

Soledad19 said:

Thank you both. I'm on a £51k salary and I have paid £7964 in taxes last year, I have no other income.... Do I get a tax rebate?? 

Forget how much tax you've actually paid, and look at your gross earnings. You can contribute 80% of your gross pay (£40,800) during the tax year as tax relievable personal contributions. Assuming this is a relief at source arrangement such as a group personal pension, the provider will add basic rate tax relief to your 'pot', bringing you up to 100% of earnings.

There is an overall tax-relievable annual limit of £60K. This includes any employer contributions. Any contributions you make by salary sacrifice don't count as personal contributions.

If you are a higher rate tax payer, you will be able to claim further tax relief on your personal contributions to the extent you've paid higher rate tax in the first place (even where the higher rate results from other taxable income such as interest, dividends etc).

You don't say how much your ISA is worth, but if necessary you could pay it in to your pension over more than one tax year.

Soledad19

Marcon said:

Soledad19 said:

Thank you both. I'm on a £51k salary and I have paid £7964 in taxes last year, I have no other income.... Do I get a tax rebate?? 

Forget how much tax you've actually paid, and look at your gross earnings. You can contribute 80% of your gross pay (£40,800) during the tax year as tax relievable personal contributions. Assuming this is a relief at source arrangement such as a group personal pension, the provider will add basic rate tax relief to your 'pot', bringing you up to 100% of earnings.

There is an overall tax-relievable annual limit of £60K. This includes any employer contributions. Any contributions you make by salary sacrifice don't count as personal contributions.

If you are a higher rate tax payer, you will be able to claim further tax relief on your personal contributions to the extent you've paid higher rate tax in the first place (even where the higher rate results from other taxable income such as interest, dividends etc).

You don't say how much your ISA is worth, but if necessary you could pay it in to your pension over more than one tax year.

Thanks Marcon, the ISA is worth £50k. I think I'm a basic rate taxpayer and £51k is the gross salary. I'm paying into my workplace pension short of £300 a month and my employer is matching with another £400.

Dazed_and_C0nfused

Soledad19 said:

Marcon said:

Soledad19 said:

Thank you both. I'm on a £51k salary and I have paid £7964 in taxes last year, I have no other income.... Do I get a tax rebate?? 

Forget how much tax you've actually paid, and look at your gross earnings. You can contribute 80% of your gross pay (£40,800) during the tax year as tax relievable personal contributions. Assuming this is a relief at source arrangement such as a group personal pension, the provider will add basic rate tax relief to your 'pot', bringing you up to 100% of earnings.

There is an overall tax-relievable annual limit of £60K. This includes any employer contributions. Any contributions you make by salary sacrifice don't count as personal contributions.

If you are a higher rate tax payer, you will be able to claim further tax relief on your personal contributions to the extent you've paid higher rate tax in the first place (even where the higher rate results from other taxable income such as interest, dividends etc).

You don't say how much your ISA is worth, but if necessary you could pay it in to your pension over more than one tax year.

Thanks Marcon, the ISA is worth £50k. I think I'm a basic rate taxpayer and £51k is the gross salary. I'm paying into my workplace pension short of £300 a month and my employer is matching with another £400.

In that case you can't contribute another £50k.

You need to check your expected taxable income (P60 pay figure) and also how much your current contributions are.

Assuming they are relief at source is it £300 before the basic rate relief is added or £300 inclusive of the basic rate relief?

Pipthecat

Soledad19 said:

Thank you both. I'm on a £51k salary and I have paid £7964 in taxes last year, I have no other income.... Do I get a tax rebate?? 

You original question has been answered but I'm interested in the driver for doing this?  As a basic rate tax payer now and presumably a basic rate tax payer when drawing your pension, the benefits are relatively modest over a short period. I'm asking from the perspective of someone who is doing something similar.  My dilemma is that I may want to take some large chunks of cash early on in my retirement (if not before) and taking it from my ISA would have the benefit of not impacting the taxable income from my pension.

Soledad19

Pipthecat said:

Soledad19 said:

Thank you both. I'm on a £51k salary and I have paid £7964 in taxes last year, I have no other income.... Do I get a tax rebate?? 

You original question has been answered but I'm interested in the driver for doing this?  As a basic rate tax payer now and presumably a basic rate tax payer when drawing your pension, the benefits are relatively modest over a short period. I'm asking from the perspective of someone who is doing something similar.  My dilemma is that I may want to take some large chunks of cash early on in my retirement (if not before) and taking it from my ISA would have the benefit of not impacting the taxable income from my pension.

The driver is the low interest rate ISA offers and will continue to offer, compared to the performance of workplace pensions. I'm not planning to take chunks of money out, my goal is to maximise the pension pot in view of an annuity.

NoMore

Pipthecat said:

Soledad19 said:

Thank you both. I'm on a £51k salary and I have paid £7964 in taxes last year, I have no other income.... Do I get a tax rebate?? 

You original question has been answered but I'm interested in the driver for doing this?  As a basic rate tax payer now and presumably a basic rate tax payer when drawing your pension, the benefits are relatively modest over a short period. I'm asking from the perspective of someone who is doing something similar.  My dilemma is that I may want to take some large chunks of cash early on in my retirement (if not before) and taking it from my ISA would have the benefit of not impacting the taxable income from my pension.

6.25% gain from pension over ISA for basic rate taxpayers, more if higher tax payer on contribution and lower on withdrawal.

£100 into ISA is £100 on withdrawal

£100 into Pension, becomes £125 after basic tax relief. On withdrawal you get 25% tax free (£31.25) and the rest taxable at 20% (£93.75 * 0.8 = £75), giving a total of £106.25 from an initial contribution of £100

Albermarle

It was not clear you were talking about a Cash ISA ( as opposed to a stocks and shares ISA)
It does not affect the info you have been given, only to say that it is always a good idea to have some cash savings easily available in case of emergencies.