Cash or DC pension First?

magd36

I’ve a 2:1 mix of DC pension and ISA cash to live off in my retirement. Is there a general rule (or do I need to do a detailed calculation of multiple scenarios) for what to take first? Cash first? DC pension first? A mix throughout (what ratio)? My personal allowance is already used up by my state pension. Any advice appreciated.

Dazed_and_C0nfused

magd36 said:

I’ve a 2:1 mix of DC pension and ISA cash to live off in my retirement. Is there a general rule (or do I need to do a detailed calculation of multiple scenarios) for what to take first? Cash first? DC pension first? A mix throughout (what ratio)? My personal allowance is already used up by my state pension. Any advice appreciated.

How much taxable (non ISA) interest do you expect to receive each year?

magd36

Dazed_and_C0nfused said:

How much taxable (non ISA) interest do you expect to receive each year?

None. All Cash is in ISA Accounts.

MK62

Generally, it's use personal allowance first, then ISA/cash (ie tax free), then pensions (ie taxable).

However, there are always corner cases for one reason or another.......and in the long run, it may not make much difference overall. 

ali_bear

Long term the DC fund will gain from real growth. If that is a cash ISA its value will be eroded over time. 

leosayer

The most important thing is how your savings are invested.

Draw too much from your DC now and you won't have growth that you might need to beat inflation and sustain you over the next 10-20 years.

Draw too much from your cash ISA and your DC investment could experience a market drop that will reduce the amount you can take from DC.

More details needed. 

Albermarle

If you are happy with the current 2:1 mix, then you will have to withdraw from both to keep the ratio steady.

tetrarch

Dependent on your portfolio size and tax position, i may make more sense to switch the portfolios over, given your investment mix

The investment growth within your ISA is (and hopefully always remains) tax-free. withdrawals from your DC pension are taxable

Therefore it makes sense to keep your cash component (or equivalent) within your DC pension and move your equity investments within your ISA, thus avoidding a tax charge on your investment growth.

Regards

Tet

DRS1

Have you already used the tax free lump sum from the pension?

Do you have any objection to paying a bit of basic rate tax on the pension withdrawals?

If you don't draw on the pension what will happen to it?  Is there someone else you want to leave it to?

Triumph13

tetrarch said:

Dependent on your portfolio size and tax position, i may make more sense to switch the portfolios over, given your investment mix

The investment growth within your ISA is (and hopefully always remains) tax-free. withdrawals from your DC pension are taxable

Therefore it makes sense to keep your cash component (or equivalent) within your DC pension and move your equity investments within your ISA, thus avoidding a tax charge on your investment growth.

Regards

Tet

Nope.  It makes no difference at all - as long as you adjust your asset allocation in the first place to reflect the tax position.  For a 20% taxpayer £100k in a crystallised pension is exactly equivalent to £80k in an ISA in the same asset class, no matter what the subsequent growth.

leosayer

Triumph13 said:

tetrarch said:

Dependent on your portfolio size and tax position, i may make more sense to switch the portfolios over, given your investment mix

The investment growth within your ISA is (and hopefully always remains) tax-free. withdrawals from your DC pension are taxable

Therefore it makes sense to keep your cash component (or equivalent) within your DC pension and move your equity investments within your ISA, thus avoidding a tax charge on your investment growth.

Regards

Tet

Nope.  It makes no difference at all - as long as you adjust your asset allocation in the first place to reflect the tax position.  For a 20% taxpayer £100k in a crystallised pension is exactly equivalent to £80k in an ISA in the same asset class, no matter what the subsequent growth.

The previous poster proposed different asset classes.