Use SIPP Tax Free Cash Or ISAs First

Cbjroms

I am 64, still employed and have 5 years of living expenses in ISAs. I also have a SIPP from which I have yet to drawdown any money.

The ISAs are maturing in January/February and, at that time, I envisage needing the same amount of cash for various purposes. 

It seems to me that pre-2027 (pensions coming into the estate) legislation then it would make more sense to use the ISAs just in case something happens to me in the next 15 months! After that time then I cant see any benefit of prioritising ISAs over Tax Free Cash as it will all be within the estate. 

Am I missing anything?

LHW99

If you take any taxable cash from a DC pension you trigger the MPAA (£10k pa).

Have you worked out whether your pension provision will be sufficient for your lifestyle (would taking TFLS from the SIPP reduce the level of income you can get when you stop working)?

If you have a partner, how will they cope if you went first? Is their provision, plus what you may bequeath them, sufficient?

Linton

Cbjroms said:

I am 64, still employed and have 5 years of living expenses in ISAs. I also have a SIPP from which I have yet to drawdown any money.

The ISAs are maturing in January/February and, at that time, I envisage needing the same amount of cash for various purposes. 

It seems to me that pre-2027 (pensions coming into the estate) legislation then it would make more sense to use the ISAs just in case something happens to me in the next 15 months! After that time then I cant see any benefit of prioritising ISAs over Tax Free Cash as it will all be within the estate. 

Am I missing anything?

S&S ISAs can be used alongside pensions to provide tax benefits whilst in retirement...
1) In the period leading up to receiving State Pension you can use any otherwise unused tax allowance to withdraw taxable pension money tax free and put it in the same investments in an S&S ISA thus avoiding any tax on it and any investment returns it subsequently generates.
2) If you are in danger of being a higher rate tax payer in retirement it would be highly beneficial to maximise your tax free income from an ISA.

ali_bear

Cbjroms said:

Am I missing anything?

Are you still contributing to your pension? This can be a good way of avoiding income tax if you can afford to put the money away until retirement, because you'll probably be paying less tax on that money after retirement.