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    • Daveinlincoln
    • By Daveinlincoln 14th Sep 18, 1:14 PM
    • 31Posts
    • 8Thanks
    Daveinlincoln
    Taking money out of ISA to put in Pension?
    • #1
    • 14th Sep 18, 1:14 PM
    Taking money out of ISA to put in Pension? 14th Sep 18 at 1:14 PM
    Looks like i'm not going to be able to contribute the maximum into my SIPP this year due to having to pay a few bills (wifes car packed up, holidays etc).

    But I really don't want to miss out on the tax relief so I was thinking about perhaps taking money out of my Stocks and Shares Isa and using that to get up to the maximum 32000 so as to get the 8000 tax relief...is this a decent idea?

    I'm searching for the negatives in doing this but I can't see any?

    Any advice/comments gratefully received.
Page 1
    • Linton
    • By Linton 14th Sep 18, 2:03 PM
    • 9,942 Posts
    • 10,217 Thanks
    Linton
    • #2
    • 14th Sep 18, 2:03 PM
    • #2
    • 14th Sep 18, 2:03 PM
    Are you sure you are allowed to pay in 32K? The 40K gross limit includes any employer contribution. There is also the earned income limit. On the other hand you may be able to contribute more than 40K if you didnt use all that allowance last year.


    Provided all the requirements are met the downside of putting ISA money into a SIPP is that access becomes more difficult or impossible if you are under 55. If you are a basic rate tax payer now and a basic rate tax payer in retirement the benefit is only the tax you dont pay on the tax free lump sum ie 20% of 25% = 5%. Whether this gain is worth the loss in flexibility is up to you.
    • lisyloo
    • By lisyloo 14th Sep 18, 2:16 PM
    • 22,706 Posts
    • 11,285 Thanks
    lisyloo
    • #3
    • 14th Sep 18, 2:16 PM
    • #3
    • 14th Sep 18, 2:16 PM
    If you are a basic rate tax payer now and a basic rate tax payer in retirement the benefit is only the tax you dont pay on the tax free lump sum ie 20% of 25% = 5%.

    Please the first 11,850 (or personal allowance at the time) is tax free each year (minus state pension once you get it).
    • El Torro
    • By El Torro 14th Sep 18, 2:50 PM
    • 313 Posts
    • 284 Thanks
    El Torro
    • #4
    • 14th Sep 18, 2:50 PM
    • #4
    • 14th Sep 18, 2:50 PM
    I would only transfer money from my ISA to my pension if it meant I was getting 40% tax relief, not 20%. As mentioned though it depends on your age, I'm pretty far from being able to access my pension so value the flexibility of my ISA.
    • Linton
    • By Linton 14th Sep 18, 2:55 PM
    • 9,942 Posts
    • 10,217 Thanks
    Linton
    • #5
    • 14th Sep 18, 2:55 PM
    • #5
    • 14th Sep 18, 2:55 PM
    Please the first 11,850 (or personal allowance at the time) is tax free each year (minus state pension once you get it).
    Originally posted by lisyloo

    Which is why I referred to a basic rate tax payer. In the OPs case given he has no problem putting 32K into a personal pension it is reasonableto assume that his marginal tax rate at retirement will be based on income of at least the personal allowance.
    • Dox
    • By Dox 14th Sep 18, 3:23 PM
    • 1,002 Posts
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    Dox
    • #6
    • 14th Sep 18, 3:23 PM
    • #6
    • 14th Sep 18, 3:23 PM
    If you are earning a salary of at least 40,000 a year, fine - dividends don't count as 'earnings' for pension purposes. If your SIPP contributions are normally paid by your company, your personal contributions are limited to an amount equal to whatever salary you draw from your company.
    • Daveinlincoln
    • By Daveinlincoln 14th Sep 18, 4:07 PM
    • 31 Posts
    • 8 Thanks
    Daveinlincoln
    • #7
    • 14th Sep 18, 4:07 PM
    • #7
    • 14th Sep 18, 4:07 PM
    Thanks for the replies everyone... I should add that I am 52 (53 in march) so i'm not a million miles away from being able to access my pension if I need to.

    I'm self employed (I pay corporation tax,ltd company) so i'm able to pay in the 32k to get the extra 8k tax relief...

    My thinking is very basic....I just want to see that pension pot grow and an extra 8k for nothing is just too good to resist.
    • Dazed and confused
    • By Dazed and confused 14th Sep 18, 4:15 PM
    • 3,188 Posts
    • 1,591 Thanks
    Dazed and confused
    • #8
    • 14th Sep 18, 4:15 PM
    • #8
    • 14th Sep 18, 4:15 PM
    So you're not self employed.

    Is there a reason the limited company isn't making the contribution?
    • FatherAbraham
    • By FatherAbraham 14th Sep 18, 6:36 PM
    • 914 Posts
    • 679 Thanks
    FatherAbraham
    • #9
    • 14th Sep 18, 6:36 PM
    • #9
    • 14th Sep 18, 6:36 PM
    Thanks for the replies everyone... I should add that I am 52 (53 in march) so i'm not a million miles away from being able to access my pension if I need to.

    I'm self employed (I pay corporation tax,ltd company) so i'm able to pay in the 32k to get the extra 8k tax relief...

    My thinking is very basic....I just want to see that pension pot grow and an extra 8k for nothing is just too good to resist.
    Originally posted by Daveinlincoln
    It's not eight thousand for nothing. It's only tax deferred, not tax free.
    • Marcon
    • By Marcon 14th Sep 18, 7:13 PM
    • 541 Posts
    • 404 Thanks
    Marcon
    Thanks for the replies everyone... I should add that I am 52 (53 in march) so i'm not a million miles away from being able to access my pension if I need to.

    I'm self employed (I pay corporation tax,ltd company) so i'm able to pay in the 32k to get the extra 8k tax relief...

    My thinking is very basic....I just want to see that pension pot grow and an extra 8k for nothing is just too good to resist.
    Originally posted by Daveinlincoln
    You're not self employed if you are a PAYE employee of your limited company. Make sure it is the company which makes the SIPP contribution from company funds, albeit you need to withdraw cash from your ISA to live on.
    • Dazed and confused
    • By Dazed and confused 14th Sep 18, 7:34 PM
    • 3,188 Posts
    • 1,591 Thanks
    Dazed and confused
    And if the company pays you cannot get basic rate relief added by the pension company.
    • brokenglasses
    • By brokenglasses 14th Sep 18, 8:41 PM
    • 8 Posts
    • 10 Thanks
    brokenglasses
    If you were to make payments from your limited company then it can be treated as a company expense so no corporation tax or income tax is due. You can do that instead of drawing PAYE or dividends from the company and you can use your ISA to live on. You may also have the option to carry-forward any used allowances from the last 3 years so that might be worth investigating as well.
    • Wildsound
    • By Wildsound 15th Sep 18, 10:57 AM
    • 205 Posts
    • 133 Thanks
    Wildsound
    Putting money into a pension would get money out of your estate for inheritance tax purposes, so if IHT is a factor you need to consider, then it's a pro for this.
    Age and accessibility to the money is another. If you need to access some of this money in the near immediate future, then maxing your pension contributions might not be a good idea.
    If you are approaching the Lifetime Allowance (currently 1.03m) then putting money into the pension might not be a good idea either.
    Are you married? It might be a better idea to contribute to their pension instead if some of the above factors come into play.

    It's not an easy topic with a definitive answer. A lot of factors come into play in terms of your circumstances, age, ambitions, requirements etc...
    • soulsaver
    • By soulsaver 16th Sep 18, 11:49 PM
    • 2,112 Posts
    • 966 Thanks
    soulsaver
    If you decide to use your ISA money & assuming your S&S isa isn't flexible, may I suggest you move it to a flexible cash isa first (for example Ford Money) which allows you to w/d the money without losing the allowance, and thence into your pension.

    This allows you to replace the money taken from the ISA upto the end of the current tax year (and to add this years allowance) should you have the available funds.
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