Transferring cash from S&S ISA to Cash ISA after 2027

CaptainWales

Hi

I would appreciate some advice on this, which I saw on MSE:

"From April 2027, under-65s won't be able to transfer money from non-cash ISAs to cash ISAs. However, you WILL still be able to do the reverse – moving money from cash ISAs into non-cash ISAs. This transfer restriction will be lifted from the start of the tax year in which you turn 65".

So does that mean if I cash in my investments in my S&S ISA, then I won't be able to move the proceeds into a Cash ISA until I'm 65? If so, that seems like it effectively ties me in to leaving any proceeds in the S&S ISA until I'm 65, unless I withdraw the money at which point it loses its tax free status.

Woodstok2000

Correct. It's another result of the lowering of the cash isa limit to £12k for under 65s. Otherwise you could get round it by depositing all your money into s&s isas and then transferring it across.

CaptainWales

This is a very big change indeed then!

As I approached retirement, I had intended to supplement a reduced salary (due to less hours worked) through the interest generated by my cash ISA. Currently most of my ISA money is in a S&S so it grows better than in a cash ISA. But if I can't then move old ISA annual subscriptions from my S&S ISA into a cash ISA before I'm 65 then there goes my early retirement plan.

masonic

You'll actually be able to transfer to a cash ISA at the start of the tax year you turn 65, so while you are still 64 assuming your birthday isn't 6th April.

There are various options for cash-like safety within the S&S ISA wrapper that it appears will not incur any tax charge:

• A Money Market Fund assuming you continue to hold some other investments (can achieve just above base rate and no need to keep switching to avoid the rate dropping)
• A mixed MMF/bond fund, such as Royal London Short Term Fixed Income Enhanced, which you could use as that "other investment" (seems to generate income at 1% above base rate approximately)
• Individual gilts (working like fixed term savings accounts, but with some of the return coming from capital gains)

There are also high income funds and investment trusts that can generate income while holding equities.

dunstonh

So does that mean if I cash in my investments in my S&S ISA, then I won't be able to move the proceeds into a Cash ISA until I'm 65? If so, that seems like it effectively ties me in to leaving any proceeds in the S&S ISA until I'm 65, unless I withdraw the money at which point it loses its tax free status.

It's not as bad as it sounds. You can reduce your risk by using lower-risk assets such as short-term money markets and short-term gilts and bonds. Whilst you don't want to go 100% money markets because there are anti-avoidance rules for that. You can get very close.

And in most cases, people don't spend all of their money on the first day of their retirement. So the money will likely be there far longer and won't need as much risk reduction, or any potentially apart from what is being drawn out in the short term.

This is a very big change indeed then!

Not really. It's pretty easy to work around it.

As I approached retirement, I had intended to supplement a reduced salary (due to less hours worked) through the interest generated by my cash ISA. 

Any reason why you can't do similar with a stock and shares ISA?

Have you considered using the pension wrapper? (Which is better than an ISA in most cases).

But if I can't then move old ISA annual subscriptions from my S&S ISA into a cash ISA before I'm 65 then there goes my early retirement plan.

No, your early retirement plan hasn't been affected by this.

CaptainWales

"Any reason why you can't do similar with a stock and shares ISA?

Have you considered using the pension wrapper? (Which is better than an ISA in most cases)".

Yes - I use my full annual pension allowances where possible. Also I wouldn't be able to access this money until at least 57.

Would I be able to get a regular fixed income from a S&S ISA? That is the appeal to me with putting the money into cash ISA, in that I could get it to pay a regular fixed % amount each month (interest I appreciate is then outside of any tax wraper).

masonic

https://forums.moneysavingexpert.com/discussion/comment/82051749#Comment_82051749

"Would I be able to get a regular fixed income from a S&S ISA? That is the appeal to me with putting the money into cash ISA, in that I could get it to pay a regular fixed % amount each month (interest I appreciate is then outside of any tax wraper)."

Yes you would, and arguably a S&S ISA with a mix of income producing assets would be a better choice for a medium to long term income stream. You may have to log in and pull the money out into your bank account, although some providers will pay out dividends direct to an external account.

dunstonh

Yes - I use my full annual pension allowances where possible. Also I wouldn't be able to access this money until at least 57.

Well done in getting 100% salary in each year.

Yes, you won't be able to access it until 57 and you will need the ISA for the early period, but the pension is still better than the ISA, for when you can access it

Would I be able to get a regular fixed income from a S&S ISA?

Yes, both pensions and ISAs have that functionality. And work very much like the cash ISA. I.e., each amount drawn is a capital withdrawal, whether it's a Cash ISA, S&S ISA or Pension.