Pension or isa

carlbhoy

I have 90k in a drawdown pension, which  I no longer contribute too, having already taken the 25% tax free allowance, I also have s/s isa and cash isa, my question is, with the new budget rules, is it best to, if I needed significant money, would the best case be to take it from my pension, I know it entails paying tax, but as I understand it, it’s going to be taxed twice when I pass

eskbanker

carlbhoy said:

I have 90k in a drawdown pension, which  I no longer contribute too, having already taken the 25% tax free allowance, I also have s/s isa and cash isa, my question is, with the new budget rules, is it best to, if I needed significant money, would the best case be to take it from my pension, I know it entails paying tax, but as I understand it, it’s going to be taxed twice when I pass

More info needed, e.g. are you fully using your personal allowance, i.e. will you have any option to draw down without paying tax on some of it?  What tax band are you in?  Will IHT apply to your estate?

Linton

carlbhoy said:

I have 90k in a drawdown pension, which  I no longer contribute too, having already taken the 25% tax free allowance, I also have s/s isa and cash isa, my question is, with the new budget rules, is it best to, if I needed significant money, would the best case be to take it from my pension, I know it entails paying tax, but as I understand it, it’s going to be taxed twice when I pass

Assuming your estate is large enough to pay inheritance tax your ISA would also be taxed twice before it reached your beneficiaries. Your drawdown is taxed before you put the money into your ISA and then after you die the ISA money will be liable for inheritance tax. So I don’t see what good moving the pension to an ISA does you.  The only difference is who pays the income tax.

Once we know the details of how inherited pensions will be taxed the conclusion could be different, but it would be surprising if the government created a new loophole for avoiding inheritance tax.

dunstonh

 my question is, with the new budget rules, is it best to, if I needed significant money, would the best case be to take it from my pension, I know it entails paying tax, but as I understand it, it’s going to be taxed twice when I pass

Under age 75 there is no difference.  Over age 75 then pension unless your estate is under the IHT threshold and then it will depend on the taxation of your beneficiary as to which is best.

Rules are still subject to changes.

Albermarle

carlbhoy said:

I have 90k in a drawdown pension, which  I no longer contribute too, having already taken the 25% tax free allowance, I also have s/s isa and cash isa, my question is, with the new budget rules, is it best to, if I needed significant money, would the best case be to take it from my pension, I know it entails paying tax, but as I understand it, it’s going to be taxed twice when I pass

The unused pension pot will not automatically become liable for inheritance tax, which I think is a misconception that some people have.
The pension will only be subject to IHT, if your total estate ( house, savings etc ) + unused pension pot, is above the nil rate bands you have.
Even then only part of it will be subject to IHT.