Drawdown to move to ISA?

Sea_Shell · 21 June 2018 at 6:48AM

Morning Everyone,

Can i just run this by you, to see if i've got this right...

If at age 65, you would become a taxpayer, due to DB pensions kicking in. Would it be tax efficient, and therefore wise, to start draw-down on a DC pension from 55, and then putting this money straight into your ISA for that year, thereby re-investing it, and being able to then draw it tax free as and when you want/need. Basically getting at £150,000 pot completely tax free?

e.g. draw £15,000, of which 25% tax free and remaining 75% within Personal allowance, then reinvest whole £15k in ISA.

This is assuming that you don't NEED the money before then (drawing down cash instead)

Seems to good to be true....what's the catch??!!

MallyGirl · 21 June 2018 at 7:05AM

Would you not have any other income from 55?

TcpnT · 21 June 2018 at 9:23AM

As the above poster states, this would only work if you have no other taxable income between 55 and 65.

But yes, if you are being supported by a partner or just living off cash in a current account then it would be a good plan.

dunstonh · 21 June 2018 at 10:47AM

Is your estate going to be IHT chargeable and do you have beneficiaries?

Sea_Shell · 22 June 2018 at 3:10PM

Thanks for the replies so far...

In short, no there would be no other income (this is for DH) from 55 to 65, other than approx. £1300 from interest paying accounts.

Currently over £220k in Cash/ISA's already to "live off", so it would purely be moving pension money to ISA's to be as tax efficient as possible.

As for IHT, I don't think we'd have any to pay on first death (married), but possibly on second death, if it happened whilst we still had most of our capital, but then we don't have any children, so if the N&N's have an IHT bill to pay, then that's their problem!!!! Joint net worth currently approx. £840k.

So in light of the above....is it a sensible plan???

If you want more background to our overall finances, here's the link to another thread of mine...(if you're at all interested

;) )
https://forums.moneysavingexpert.com/showthread.php?t=5631875

kidmugsy · 22 June 2018 at 4:38PM

It's fine. He could also draw more TFLS than you mention so that you could both fill ISAs ASAP. In fact it looks to me as if he has room to contribute £2880 net p.a. into a pension so that if the value of the current pension should shrink because of markets declining he will still have some capacity for this merry wheeze.

AnotherJoe · 22 June 2018 at 9:52PM

That's exactly what I'm doing though for fewer years than your OH. Took out the 25% and also taking out just under the personal allowance, so I get a bit less than £50k out on which I don't have to pay tax, which once SP and a small DB kicks in will be 20% so that's saved me £10k. I guess your OHs would be more like 3x that due to the longer span without pensions and rises in allowance. so very well worth doing.

Plus of course contributing the £2880 every year.

MK62 · 23 June 2018 at 7:23AM

It sounds like a good plan....you might even be able too eek out some extra by using the transferable marriage allowance too.....you should be able to empty a £150k pot within those 10 years unless your investments do very well, in which case your OH could look into deferral of one or both of his DB pensions..

Thumbs up for the forward planning though...:)

kidmugsy · 23 June 2018 at 11:37AM

One last thought. What if he reaches 65 and there's still a nice little pile of assets in his SIPP? Fear not! If he is considerate enough to die before age 75 you can have it all tax-free.

Drawdown to move to ISA?

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