New £12,000 limit on Cash ISA

Happy_Minion

Yorkie1 said:

Happy_Minion said:

Instead of opening a S & S ISA when this starts does it make more sense to just add the £8k in to my SIPP?

That will depend on various factors, including other savings and plans you have. For example, will you need the money before 57 (if that's your normal pension age), will you pay tax on withdrawals from the pension (not the tax-free elements, of course), what your tax rates will be before and after retirement (tax relief in and rate out).

I can access SIPP at 55 in 14 months. Planning on stopping work by 57 and taking up to my tax free allowances until full state pension at 67. At no point will I get close to higher rate tax.

I figure it'll be simpler to keep to less accounts to administer and it'll be 6.25% better off in the SIPP.

masonic

Happy_Minion said:

Yorkie1 said:

Happy_Minion said:

Instead of opening a S & S ISA when this starts does it make more sense to just add the £8k in to my SIPP?

That will depend on various factors, including other savings and plans you have. For example, will you need the money before 57 (if that's your normal pension age), will you pay tax on withdrawals from the pension (not the tax-free elements, of course), what your tax rates will be before and after retirement (tax relief in and rate out).

I can access SIPP at 55 in 14 months. Planning on stopping work by 57 and taking up to my tax free allowances until full state pension at 67. At no point will I get close to higher rate tax.
I figure it'll be simpler to keep to less accounts to administer and it'll be 6.25% better off in the SIPP.

In that situation, stuffing pensions is generally a worthwhile endeavour, unless you already have a high six figure sum already stashed and therefore need to worry about paying higher rate tax in retirement.

But it is still worth using your ISA allowance if you can. A SIPP will be a more flexible investment product where you can put all of the low risk stuff (if the changes actually happen).

InvesterJones

masonic said:

Happy_Minion said:

Yorkie1 said:

Happy_Minion said:

Instead of opening a S & S ISA when this starts does it make more sense to just add the £8k in to my SIPP?

That will depend on various factors, including other savings and plans you have. For example, will you need the money before 57 (if that's your normal pension age), will you pay tax on withdrawals from the pension (not the tax-free elements, of course), what your tax rates will be before and after retirement (tax relief in and rate out).

I can access SIPP at 55 in 14 months. Planning on stopping work by 57 and taking up to my tax free allowances until full state pension at 67. At no point will I get close to higher rate tax.
I figure it'll be simpler to keep to less accounts to administer and it'll be 6.25% better off in the SIPP.

In that situation, stuffing pensions is generally a worthwhile endeavour, unless you already have a high six figure sum already stashed and therefore need to worry about paying higher rate tax in retirement.

I would be delighted if a (high) six-figure sum was all that was needed to hit higher rate income when retiring at 57. I thought it was more like seven-figures :'( 

masonic

InvesterJones said:

masonic said:

Happy_Minion said:

Yorkie1 said:

Happy_Minion said:

Instead of opening a S & S ISA when this starts does it make more sense to just add the £8k in to my SIPP?

That will depend on various factors, including other savings and plans you have. For example, will you need the money before 57 (if that's your normal pension age), will you pay tax on withdrawals from the pension (not the tax-free elements, of course), what your tax rates will be before and after retirement (tax relief in and rate out).

I can access SIPP at 55 in 14 months. Planning on stopping work by 57 and taking up to my tax free allowances until full state pension at 67. At no point will I get close to higher rate tax.
I figure it'll be simpler to keep to less accounts to administer and it'll be 6.25% better off in the SIPP.

In that situation, stuffing pensions is generally a worthwhile endeavour, unless you already have a high six figure sum already stashed and therefore need to worry about paying higher rate tax in retirement.

I would be delighted if a (high) six-figure sum was all that was needed to hit higher rate income when retiring at 57. I thought it was more like seven-figures :'( 

If you have £800k growing at 5% real, then you could potentially pull >£40k in today's money perpetually, which, together with state pension (when you get there) would make you a higher rate taxpayer if real tax thresholds remained where they are today. Of course you could be unlucky with sequence of returns and get a worse outcome, but equally, you could be lucky and find yourself with more in your pension than you could ever get out while capping withdrawals below HRT. In that scenario, as a BR taxpayer now I'd rather put new money in an ISA and not tax-defer.

If you opt for a single life annuity, then at current rates, £800k would buy you an RPI-linked £33k pa, which after a few more years of fiscal creep might even tip you over when you get to SPA. I suppose in this scenario you'd take the PCLS and reduce the annuity to £25k-ish, which would give you more headroom, but potentially generate unwrapped income itself unless you were using it to clear a mortgage or similar.