S&S ISA > Pension?

Paul_Herring wrote: »

And, simplistically, £100 comes out of your pension and it gets taxed at 20%, £80 comes out of your ISA, it doesn't get taxed.

Caveats, of course, include any NI savings going in, and the TFLS and any remainder of personal allowance coming out of the pension which still make the pension preferable if you can wait until 55.

But your caveats destroy the case you made in your "simplistically", since simplistically, of the £100 that comes out, £25 isnt taxed at all, and the other £75 is only taxed if you have income above the personal allowance. As per another poster here I've taken out my 25% tax free and am taking out my personal allowance each year as well, zero tax.

Zola. wrote: »

What is the % amount for withdrawing without tax penalties?

How is that determined?

You can take, once, 25% of the pot tax free.

Beyond that, there isn't a set percentage, per se - it's decided by the income tax bands.

So for 2018/19 your tax free allowance is £11,850.

If you have no other income, you can withdraw up to that without paying any tax. if you have other income, deduct that from the £11,850.

Any withdrawals above that (for the next £34,500) will be taxed at 20%. Then the 40% band and the 45% band.

Wash, lather, rinse, repeat next tax year for what's left of that 75%.

Zola. wrote: »

So a retiree today not wanting to get taxed on their pension would need to supplement their withdrawals with savings to live comfortably, you could argue..

£987 a month isn't much to live on, even when the mortgage is long paid off, the bills don't stop (provided of course you retire before state pension age).

That's what this retiree is doing. Not indefinitely but, as you say, until SRA. Putting off several years worth of tax is worth quite a few quid !

Obviously it depends on your personal circumstances. For me I have around 50% in ISAs and 50% in pensions. I didn't invest heavily in pensions until the rules changed and withdrawal restrictions were lifted. As I have a 50:50 split I am hoping to plan my withdrawal strategy from my pension so I pay hardly any tax (i.e 15k from pension with will include 25% tax free lump sum and any top up required from ISA).

Initially I invested into ISAs as I wanted to ensure, if required, I could access money before 55. As I am now 53 this is no longer an issue.

Isas dont protc your money from creditors, and are taken into acct should you lose your job and need to get benefits.