Taking all of private pension

football1966

Hi,
I was wondering if it would be better to withdraw all my private pension amount of £38,000 out over the next four years as I've retired . I would withdraw £12,000 a year as to avoid paying tax as its below my personal allowance. I get my state pension in 5 years time at 67. If I leave my private pension till then I will end up paying tax on it. I would put the withdrawn money into my ISA account. Any advice would be gratefully received. Thank you

SVaz

Yes,  getting it all out tax free and into an ISA is a smart move and exactly what my Wife is doing.  

Hopefully it’s all sitting there already in cash / a Short term money market fund?  As now is Not a good time to start selling! 

SVaz

You can actually draw  £16800 a year when you factor in the tax free 25%, assuming you aren’t using any of your personal allowance . 

Marcon

football1966 said:

Hi,
I was wondering if it would be better to withdraw all my private pension amount of £38,000 out over the next four years as I've retired . I would withdraw £12,000 a year as to avoid paying tax as its below my personal allowance. I get my state pension in 5 years time at 67. If I leave my private pension till then I will end up paying tax on it. I would put the withdrawn money into my ISA account. Any advice would be gratefully received. Thank you

If you've already retired, what are you living on - specifically, are you eligible for and/or drawing any benefits? 

SVaz said:

Yes,  getting it all out tax free and into an ISA is a smart move and exactly what my Wife is doing.  

...but not always, if someone is eligible for certain state benefits. ISAs and pensions are treated differently in some cases depending on the type of scheme and age of the individual concerned.

football1966

Hi Marcon, 
I have savings until I receive my state pension. I do not need to apply for any benefits and was just wondering whether it was a good idea to withdraw my private pension before I get in the position in 5 years time even though my pension may increase in value a bit but having to pay tax on it

SVaz

You can invest some of the cash in your ISA in exactly the same way as in your pension.  Are you planning to use all of the money within the 5 years?   If so then a Cash ISA will currently pay around 4.5% interest.
My Wife has a Trading 212 ISA that she’s putting her pension draw down into, she won’t be using it for income for a couple of years yet so it will grow a bit. 

football1966

I was planning to remove all the money from my pension in the next 4 years as not to pay any tax and put it all in my ISA each year

Marcon

football1966 said:

Hi Marcon, 
I have savings until I receive my state pension. I do not need to apply for any benefits and was just wondering whether it was a good idea to withdraw my private pension before I get in the position in 5 years time even though my pension may increase in value a bit but having to pay tax on it

Thank you. It was the benefits bit that I was flagging. Your pension pot might indeed increase in value - but if you withdraw the funds and put the money into similar types of fund, but held in an ISA, you'll still be within a tax-favoured environment. You would also have the plus point of tax free withdrawals from your ISA, so in your case it makes a lot of sense, based on what you've said.

SVaz

We’ve worked out that my Wife will save a good £15k in tax by getting everything out of her Sipp and into her ISA before she’s 67.   

football1966

Thanks for all the advice,  very much appreciated 👏 

football1966

Hi
Has anyone else retired early and decided to remove all their private pension before they receive their state pension in order to avoid paying tax in the future
Thanks