Pension to ISA Benefits?

paulus6

Hi, Taking into account the freeze on the personal allowance for the forseeable, do the forum members think that taking my 25% tax free lump sum out of my pensions and using it to top up my ISA would be a good move ? 
. My thinking is, why pay tax on any income above my state pension which I would if I drawdown my pensions, when , if I transfer as much as I am allowed into an ISA now, I can withdraw it when I want, and earn tax free interest . Seems like a no brainer. 

QrizB

Are you expecting your pensions to exceed £1M?

Ifnot, you may as well leave the money inside the pension until you need it.

Tryinghardtosave

Do you mean to take part of your tax free sum to have readily available in an ISA ? Are you wanting to max out your ISA now before the limit drops ?

Baldytyke88

I took my 25% tax free some months ago and I intend to put some more money back into my SIPP, when/if the market drops.

I am still working, so I can still contribute to a pension.

Albermarle

paulus6 said:

Hi, Taking into account the freeze on the personal allowance for the forseeable, do the forum members think that taking my 25% tax free lump sum out of my pensions and using it to top up my ISA would be a good move ? 
. My thinking is, why pay tax on any income above my state pension which I would if I drawdown my pensions, when , if I transfer as much as I am allowed into an ISA now, I can withdraw it when I want, and earn tax free interest . Seems like a no brainer. 

You can leave it in the pension and withdraw it when you want. The freeze on personal allowances obviously has no effect on the tax free cash.
So you do not really gain or lose anything by transferring it to an ISA.

Yorkie1

If you take out all of your 25% tax free, the remaining 75% will be crystallised and therefore taxable when you access it, irrespective of whether it's grown in the meantime.

dunstonh

Taking into account the freeze on the personal allowance for the forseeable, do the forum members think that taking my 25% tax free lump sum out of my pensions and using it to top up my ISA would be a good move ? 

The 25% Tax free cash has nothing to do with the personal allowance.  So, any justification for linking taking the 25% to that, is going to be weak.   There can be good reasons for taking the 25% TFC and some bad ones.

Assuming you use the same investments in the S&S ISA as the pension, then with most platforms, that means the same returns with the same charges and both being exactly the same.

If you planned on plonking it in a cash ISA, then that would be pointless unless you plan spending it all in the next few years.

paulus6

Tryinghardtosave said:

Do you mean to take part of your tax free sum to have readily available in an ISA ? Are you wanting to max out your ISA now before the limit drops ?

Both really, if I start taking tax free cash from my pensions , then maxing out my isa every year, I can access that cash as and when I want it and it wont attract any income tax , if it where added along with my state pension and remaing private and work pensions. 

paulus6

Albermarle said:

paulus6 said:

Hi, Taking into account the freeze on the personal allowance for the forseeable, do the forum members think that taking my 25% tax free lump sum out of my pensions and using it to top up my ISA would be a good move ? 
. My thinking is, why pay tax on any income above my state pension which I would if I drawdown my pensions, when , if I transfer as much as I am allowed into an ISA now, I can withdraw it when I want, and earn tax free interest . Seems like a no brainer. 

You can leave it in the pension and withdraw it when you want. The freeze on personal allowances obviously has no effect on the tax free cash.
So you do not really gain or lose anything by transferring it to an ISA.

Im trying to reduce my exposure to income tax, when i eventually draw on my pensions, and state pension . My theory is by moving as much as i can to an isa in the next couple of years, I can use the interest and /  or cash from the isa, tax free to top up my income .

paulus6

Tryinghardtosave said:

Do you mean to take part of your tax free sum to have readily available in an ISA ? Are you wanting to max out your ISA now before the limit drops ?

Yes, thats my thought process. 

paulus6

dunstonh said:

Taking into account the freeze on the personal allowance for the forseeable, do the forum members think that taking my 25% tax free lump sum out of my pensions and using it to top up my ISA would be a good move ? 

The 25% Tax free cash has nothing to do with the personal allowance.  So, any justification for linking taking the 25% to that, is going to be weak.   There can be good reasons for taking the 25% TFC and some bad ones.

Assuming you use the same investments in the S&S ISA as the pension, then with most platforms, that means the same returns with the same charges and both being exactly the same.

If you planned on plonking it in a cash ISA, then that would be pointless unless you plan spending it all in the next few years.

I appreciate the money taken out of the pension would no longer be invested, but my thinking is that it would reduce its exposure to income tax when i eventually retire, when it is combined with my state pension and other private an and work pensions. So the more I move into my ISA, which is currently at 4%, the less income I will pay upon retirement.