Pension

klp_3

Hi can anyone tell me if it would be possible to transfer cash from a pension into an ISA?

I am trying to look at possible ways to cash in a pension.

jem16

You cannot cash in a pension in any way. When you are 55(50 at the moment) you will be able to take 25% tax-free cash.

dunstonh

Why would you want to put the pension into an ISA. Until commencement the pension is more tax efficient than the ISA.

klp_3

dunstonh wrote: »

Why would you want to put the pension into an ISA. Until commencement the pension is more tax efficient than the ISA.

It was just one way i could see to release my money from an old pension which i no longer contribute, i have £9000 locked in the pension and was told by the company that it would probably not make any more, in fact there is a good chance it would decline in value.

dunstonh

have £9000 locked in the pension and was told by the company that it would probably not make any more, in fact there is a good chance it would decline in value.

Transfer it to another pension then.

klp_3

dunstonh wrote: »

Transfer it to another pension then.

Yes that would make sense, but after researching pensions i have realised that i would be better off saving money myself, e.g. if i was to put around £100 per month into a pension for the next 37 years which i have left till i am 70, i would be lucky if in return i receive £3000 per year.
If i then go on to live to be 90 which is unlikely i would only have received around £60,000 which is less than half of my investment.

Retired_I.F.A.

Your maths and research to be honest are crap.

klp_3

Granted, i dont claim to be good at maths but i am only going off advise that i am being given.

OK lets start again, if i were to transfer my money to another pension and add about £100 per month what would i be likely to receive when i retire?

Retired_I.F.A.

dob / sex / health / chosen retirement date to illustrate / salary now / occupation /attitude to risk are all needed fist and that's just regading the contributions.
You'd need to tell us a fair bit more about the old pension as well before anyone could even give you a clue

.

dunstonh

Yes that would make sense, but after researching pensions i have realised that i would be better off saving money myself, e.g. if i was to put around £100 per month into a pension for the next 37 years which i have left till i am 70, i would be lucky if in return i receive £3000 per year.

As RIFA says, your maths are out. However, an ISA would be worse than a pension. In reality, £100pm isnt worth the efford unless you are in your 20s. You may as well plan to be poor in retirement. I am being very serious there as well.

If you started at £100pm and asuming you are 30 or 31 (which would match a state retirement age of 67/68) then you should be ok providing you increase the contributions annually with RPI.

jamesd

klp, here's a comparison of pension with stocks and shares ISA (cash ISA is far worse, didn't bother to include it) making reasonable assumptions about growth and income available.

With an ISA, 100 a month at 7% for 37 years gives a pot of 210,877 of which growth is 166,477 and contributions 44,400. At 6% drawing for income gives 12,648 a year, 252,960 until age 90. Inflation of contribution values and pension payment value ignored for this calculation.

With a pension plan at basic rate and income drawdown 100 a month of net income is 125 of contributions. 125 a month at 7% for 37 years gives a pot of 263,596 of which growth is 208,096, contributions with tax relief 55,000 and your own contributions before tax relief 44,400. 35% of the pot is available as a tax free lump sum, if take that then get 65,899 tax free and a remaining pot of 197,697. That remaining pot at 6% drawdown pays 11,861 a year. About 7000 of that will be tax free, the remainder at 20% so after tax income from the pot would be about 10,889. The 65,899 tax free cash at 6% could produce 3163 a month after tax. Total of the two incomes is 14,052 and over the following 20 years the total is 281,040. The tax free lump sum should really be moved into ISA investments to make it tax free and increase the income by but I've ignored that for the moment.

Stocks and shares ISA: 12,648 a year in after tax income.
Pension and drawdown: 14,052 a year in after tax income.

About 11% more income from the pension route in this example.

You'd really be gradually paying in more due to inflation and taking out more in number value due to inflation but this example is good enough to show that a pension will beat the S&S ISA route for the same investments.

I ignored the existing 9,000 in the pension for the calculation. It would add about 119,000 to the pension pot, an extra 5,712 a year in after tax income.