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Small pots v ISA ?
Hi. I have a couple of old small pension pots of no more than 5,000 pounds. I am 58. Would it be feasible to take my amount tax-free and put it in a cash ISA as he's doing little or nothing where it is.
Not very pension wealthy or pension wise so will be interested in opinions. Many thanks
Comments
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Taking it all tax free depends on your other income, only 25% will be fully tax free.
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If these are defined contribution pensions which are 'doing little or nothing' have you checked what other investment options there are within the pension schemes themselves?
Googling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!1 -
small pot withdrawals avoid triggering the MpAA but they don’t avoid paying tax
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Moving it from the pension to an ISA might make sense if you can do it in a tax year where you have less than £7.5k of other taxable income - in that case, you'd be able to move it out of the pension without paying any tax on it, since your total income would be within your personal allowance.
If that's not the case, it would be partially taxed on taking it out of the pension. So you are likely to be better to wait to take it out in some future year when you have little or no other income.
If it's just about the investment performance - you can invest in much the same things in a pension as you do in a shares ISA ( or you can transfer the pension to a SIPP where you can). Moving it to a cash ISA would avoid any possible future possible losses but would restrict yourself to the roughly 3% interest rates available there, and miss out on potentially greater investment growth.
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Why are they doing nothing? Pensions would normally be invested so that they grow? Has lifestyling been applied due to your age/retirement date?
Remember the saying: if it looks too good to be true it almost certainly is.0
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