Tax Free pension to ISA
Discussion
I am a long time lurker here.
I am 56 very shortly and my wife is 2 year younger. We will both receive full state pensions at 67.
My wife is part time, self employed and has no pension apart from the State Pension.
My DC pension is around £950K
I hope to retire in 3 years.
Would it make sense to access £40K of the tax free part of my pension each year and put this in a S&S ISA for myself and wife? (Starting now - the first year after 55)
My thinking is that my pension will reach the max PCLS of £268K soon and this would allow growth in a tax free wrapper that would dissappear once the pension reached the old LTA amount.
My pension charges are 0.25%. I am not sure what ISA fees would be like. I am also assuming growth or declines would be similar in both pension and ISA.
Does this sound like a good option? Thanks for your thoughts
I am 56 very shortly and my wife is 2 year younger. We will both receive full state pensions at 67.
My wife is part time, self employed and has no pension apart from the State Pension.
My DC pension is around £950K
I hope to retire in 3 years.
Would it make sense to access £40K of the tax free part of my pension each year and put this in a S&S ISA for myself and wife? (Starting now - the first year after 55)
My thinking is that my pension will reach the max PCLS of £268K soon and this would allow growth in a tax free wrapper that would dissappear once the pension reached the old LTA amount.
My pension charges are 0.25%. I am not sure what ISA fees would be like. I am also assuming growth or declines would be similar in both pension and ISA.
Does this sound like a good option? Thanks for your thoughts
pretty in pink said:
I am a long time lurker here.
I am 56 very shortly and my wife is 2 year younger. We will both receive full state pensions at 67.
My wife is part time, self employed and has no pension apart from the State Pension.
My DC pension is around £950K
I hope to retire in 3 years.
Would it make sense to access £40K of the tax free part of my pension each year and put this in a S&S ISA for myself and wife? (Starting now - the first year after 55)
My thinking is that my pension will reach the max PCLS of £268K soon and this would allow growth in a tax free wrapper that would dissappear once the pension reached the old LTA amount.
My pension charges are 0.25%. I am not sure what ISA fees would be like. I am also assuming growth or declines would be similar in both pension and ISA.
Does this sound like a good option? Thanks for your thoughts
Can you put money into a pension for your wife?I am 56 very shortly and my wife is 2 year younger. We will both receive full state pensions at 67.
My wife is part time, self employed and has no pension apart from the State Pension.
My DC pension is around £950K
I hope to retire in 3 years.
Would it make sense to access £40K of the tax free part of my pension each year and put this in a S&S ISA for myself and wife? (Starting now - the first year after 55)
My thinking is that my pension will reach the max PCLS of £268K soon and this would allow growth in a tax free wrapper that would dissappear once the pension reached the old LTA amount.
My pension charges are 0.25%. I am not sure what ISA fees would be like. I am also assuming growth or declines would be similar in both pension and ISA.
Does this sound like a good option? Thanks for your thoughts
pretty in pink said:
I am a long time lurker here.
I am 56 very shortly and my wife is 2 year younger. We will both receive full state pensions at 67.
My wife is part time, self employed and has no pension apart from the State Pension.
My DC pension is around £950K
I hope to retire in 3 years.
Would it make sense to access £40K of the tax free part of my pension each year and put this in a S&S ISA for myself and wife? (Starting now - the first year after 55)
My thinking is that my pension will reach the max PCLS of £268K soon and this would allow growth in a tax free wrapper that would dissappear once the pension reached the old LTA amount.
My pension charges are 0.25%. I am not sure what ISA fees would be like. I am also assuming growth or declines would be similar in both pension and ISA.
Does this sound like a good option? Thanks for your thoughts
I'm doing similar except I took the whole 25% tax free, then max out my 20% band every year.I am 56 very shortly and my wife is 2 year younger. We will both receive full state pensions at 67.
My wife is part time, self employed and has no pension apart from the State Pension.
My DC pension is around £950K
I hope to retire in 3 years.
Would it make sense to access £40K of the tax free part of my pension each year and put this in a S&S ISA for myself and wife? (Starting now - the first year after 55)
My thinking is that my pension will reach the max PCLS of £268K soon and this would allow growth in a tax free wrapper that would dissappear once the pension reached the old LTA amount.
My pension charges are 0.25%. I am not sure what ISA fees would be like. I am also assuming growth or declines would be similar in both pension and ISA.
Does this sound like a good option? Thanks for your thoughts
The only downside is the IHT benefits of having money in a pension.
Not sure what you would gain by taking out £40k pa for two years?
The £40k pa will all be part of the LTA of £268k so it matters not if you take it as £40k + £40k + £188k or as a single £268k in. 3years.
Based on your assumptiom that a s&s isa will grow at the same rate as your pension - why bother? What are you gaining?
Dont forget too that as soon as you access any of your pensions you reduce your annual contribution limit drops from £60k pa to £10k pa by triggering MPAA.
Finally once cash is moved out of your pension and into an ISA it becomes liable gor IHT calculation should you die. Left in the peanion wrapper untouched it is not subject to IHT calcs.
The £40k pa will all be part of the LTA of £268k so it matters not if you take it as £40k + £40k + £188k or as a single £268k in. 3years.
Based on your assumptiom that a s&s isa will grow at the same rate as your pension - why bother? What are you gaining?
Dont forget too that as soon as you access any of your pensions you reduce your annual contribution limit drops from £60k pa to £10k pa by triggering MPAA.
Finally once cash is moved out of your pension and into an ISA it becomes liable gor IHT calculation should you die. Left in the peanion wrapper untouched it is not subject to IHT calcs.
AdamV12V said:
Not sure what you would gain by taking out £40k pa for two years?
Finally once cash is moved out of your pension and into an ISA it becomes liable gor IHT calculation should you die.
Unless you one day move it into an AIM IHT ISA, then after two years it won't be liable for IHT.Finally once cash is moved out of your pension and into an ISA it becomes liable gor IHT calculation should you die.
Forgot to add MPAA limit is exempt if you only withdraw a lump sum and don’t exceed your 25% tax-free entitlement
Edited by Jackals on Saturday 10th February 11:45
Jasey_ said:
You only get one pension commencement lump sum you can't take it in stages.
If you took a 40k lump that would be tax free any subsequent withdrawals would have 25% tax free the rest is taxable.
Would you care to expand on this, as it does not match my understanding - or indeed my own personal experience.If you took a 40k lump that would be tax free any subsequent withdrawals would have 25% tax free the rest is taxable.
omniflow said:
Jasey_ said:
You only get one pension commencement lump sum you can't take it in stages.
If you took a 40k lump that would be tax free any subsequent withdrawals would have 25% tax free the rest is taxable.
Would you care to expand on this, as it does not match my understanding - or indeed my own personal experience.If you took a 40k lump that would be tax free any subsequent withdrawals would have 25% tax free the rest is taxable.
( I think we are all remembering the conversation is basically about DC and SIPP products I presume )
Jasey_ said:
omniflow said:
Jasey_ said:
You only get one pension commencement lump sum you can't take it in stages.
If you took a 40k lump that would be tax free any subsequent withdrawals would have 25% tax free the rest is taxable.
Would you care to expand on this, as it does not match my understanding - or indeed my own personal experience.If you took a 40k lump that would be tax free any subsequent withdrawals would have 25% tax free the rest is taxable.
t name.As I understand it you get your lump sum by crystallising part or all of your pension when you want to access it.
If you don't crystallise it all when you want your lump sum any further withdrawals you can't just access the tax free bit you only get that option once.
You are entitled to 25% tax free of any funds crystallised.
You do not have to crystallise all your funds at the same time.
AdamV12V said:
Dont forget too that as soon as you access any of your pensions you reduce your annual contribution limit drops from £60k pa to £10k pa by triggering MPAA
Drawdown triggers the MPAA, not taking the TFLSI did similar, take a TFLS in advance of regular drawdown and add to ISAs using 2 years' allowances
pretty in pink said:
I am a long time lurker here.
I am 56 very shortly and my wife is 2 year younger. We will both receive full state pensions at 67.
My wife is part time, self employed and has no pension apart from the State Pension.
My DC pension is around £950K
I hope to retire in 3 years.
Would it make sense to access £40K of the tax free part of my pension each year and put this in a S&S ISA for myself and wife? (Starting now - the first year after 55)
My thinking is that my pension will reach the max PCLS of £268K soon and this would allow growth in a tax free wrapper that would dissappear once the pension reached the old LTA amount.
My pension charges are 0.25%. I am not sure what ISA fees would be like. I am also assuming growth or declines would be similar in both pension and ISA.
Does this sound like a good option? Thanks for your thoughts
It does sound like a good option.I am 56 very shortly and my wife is 2 year younger. We will both receive full state pensions at 67.
My wife is part time, self employed and has no pension apart from the State Pension.
My DC pension is around £950K
I hope to retire in 3 years.
Would it make sense to access £40K of the tax free part of my pension each year and put this in a S&S ISA for myself and wife? (Starting now - the first year after 55)
My thinking is that my pension will reach the max PCLS of £268K soon and this would allow growth in a tax free wrapper that would dissappear once the pension reached the old LTA amount.
My pension charges are 0.25%. I am not sure what ISA fees would be like. I am also assuming growth or declines would be similar in both pension and ISA.
Does this sound like a good option? Thanks for your thoughts
You currently have £950k from which you can take 25% or £237k tax free.
Let's say your £950k pot grows by 30% to £1,235 over the next 3 years. You would only be able to take £268k of that as a tax free lump sum which is 22% of your enlarged pot ie. lower than the 25% you can take now.
If that £268k was in an ISA instead then all future growth on that would be tax free. This of course assumes you have no other means of filling your ISA.
Just bear in mind that drawing from your pension and not spending it bring it into your estate for inheritance tax purposes.
More importantly though - why wait 3 years to retire?
Jasey_ said:
omniflow said:
Jasey_ said:
You only get one pension commencement lump sum you can't take it in stages.
If you took a 40k lump that would be tax free any subsequent withdrawals would have 25% tax free the rest is taxable.
Would you care to expand on this, as it does not match my understanding - or indeed my own personal experience.If you took a 40k lump that would be tax free any subsequent withdrawals would have 25% tax free the rest is taxable.
t name.As I understand it you get your lump sum by crystallising part or all of your pension when you want to access it.
If you don't crystallise it all when you want your lump sum any further withdrawals you can't just access the tax free bit you only get that option once.
When I’m looking at cashflows arising from individuals’ SIPPs, it’s common to see monthly income of £1,047.50 plus TFCS (i.e. PCLS) of £349.16 leading to a total income of £16,760 pa, all of which is tax-free. The individuals are crystallising £1,396 each month, taking 25% of that tax-free and the rest as potentially taxable income (but which is equal to £12,570 pa so falls within the Personal Allowance).
pretty in pink said:
I am a long time lurker here.
My wife is part time, self employed and has no pension apart from the State Pension.
Have you considered getting your wife to open a SIPP?My wife is part time, self employed and has no pension apart from the State Pension.
Even if she doesn't currently pay income tax, she could pay in £2,880 each tax year and automatically get 20% tax relief (i.e. a £720 uplift to £3,600).
https://www.gov.uk/tax-on-your-private-pension/pen...
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