ISA and SiPP - pros and cons?

Torridon1970

I have a question- more of a sense check really for me. 

Myself and my partner have a 70k lump sum that we are looking to invest and are looking for the most efficient way to do it .

I have a workplace pension being paid and a job which combined keep me just out of higher rate tax. My partner has a work place pension that is not currently drawn and is a higher rate tax payer in a current role. We are both 54 and want to retire fully in 6 years time. We both currently have 20k each in a SS ISA. 

I understand that we can both max out our ISA’s again this year but wondered if it would be more advantageous opening a  pension for my partner and investing in that? (S&S) Am I right in thinking that they would get the 40%  tax relief on that? As we are 55 next birthday we could draw it if needed but this is not the plan. Are there any downsides withdrawing from a SiPP as opposed to an ISA.

I appreciate that these are scant details but would appreciate any thoughts.

Am I correct in my understanding?

eskbanker

Pension will generally beat ISA, by virtue of the fact that 25% can be withdrawn tax-free, and the effect will be even more pronounced if a higher rate taxpayer when contributing but a basic rate one when drawing down, but total (gross) contributions are capped at annual earnings....

ColdIron

Pensions generally beat ISAs, especially for higher rate taxpayers. Given your age and your retirement plans it rather suggests itself

ISAs can bridge the gap between retirement and pension but this doesn't sound like you

Pension withdrawals are taxed (though have had tax relief) while ISAs are tax free (but no relief)

Make sure your wife doesn't take any pension income before you contribute as it will greatly limit any further contributions (currently £10,000 with the MPAA)

But yes, you are correct in your understanding

Albermarle

. My partner has a work place pension that is not currently drawn and is a higher rate tax payer in a current role. 

Rather than opening a separate SIPP, can they not just increase contributions to their current workplace pension?

Often this is the better way but without more detail it is difficult to be sure.