Best Source Of Funds

SCWYP

Hi,

Not sure if this is one for a pensions forum or a savings forum so please move if I have posted in the wrong area.

I'm 59 and receive a DB pension so all of my 0% tax band is used up.

I want to access £20k of savings for a building project, what is the best source of funds?

Take it from an ISA? I won't be able to replace it during this tax year as well as use this years allowance though.

Take it as a Tax Free Lump Sum from a SIPP and crystalise a further £60k in the SIPP?

Take £23,600 from a SIPP, £5,900 tax free and pay £3540 tax (20%) on the remainder? I will have enough 20% band left to do that this year.

I still work part time occasionally and when I do I pay into the employers pension scheme but I can't foresee the £10k pa limit as a result of having taken taxable income being an issue in the future.

cockerWalker

In your shoes I would use tax free lump sum for it. Pensions are going from being the last source of funds to use to the first in terms of inheritance tax planning, and it doesn't sound like there's any prospect if you being in a lower tax band in the future. Keep your growth in your ISA as much as possible (assuming stocks and shares ISA) and accept that one day you're going to have to pay some tax on SIPP withdrawals, but it doesn't have to be yet.

Albermarle

cockerWalker said:

In your shoes I would use tax free lump sum for it. Pensions are going from being the last source of funds to use to the first in terms of inheritance tax planning, and it doesn't sound like there's any prospect if you being in a lower tax band in the future. Keep your growth in your ISA as much as possible (assuming stocks and shares ISA) and accept that one day you're going to have to pay some tax on SIPP withdrawals, but it doesn't have to be yet.

It is true that if your estate is likely to be in IHT territory, currently it is best in most cases to leave withdrawals from a DC pension as the last option.
After the change in 2027, this does not mean that the pension will necessarily then be the first port of call  from an IHT point of view, as there will be no difference between taking money from a pension, ISA or other savings/investments. So the decision of where to take funds from will be driven by other factors.