Converting Your Pension To An ISA

[@coling4991]

Really useful video and helped me confirm ideas I had about moving money from pensions to ISA when my wife and I are able to, in the next few years. On retirement we're planning on investing a good chunk of our portfolio in high yield dividend etfs for a nice income, so ISA's seem to be the way to go for that. We'd keep the rest of our portfolio in growth stock funds and bonds. Still lots to investigate though :)

[@robkewley]

Worth updating now mmpa has increased and LTA is gone?

[@manishrana6]

Awesome video ..how abt if I just keep filling my SIPP and emp contribution and make sure it doesn't exceed my LTA before or during retirement?

[@carlrobertsonmoney]

Just remember that the pension Lifetime Allowance shouldn’t Always be avoided especially if your pension contributions are from your employer (free money). You don’t want to turn down a pay rise just because the pay rise is taxed more.

[@manishrana6]

@@carlrobertsonmoney good point, I am planning to retire at 60 so SIPP and emp contribution is the way for me but wonder should I have contributed to s&S ISA too. I have seen ppl obsessed with ISA ,they don't realise the power of SIPP , but then they might be thinking of retirement before 58.

[@philboyce1582]

Sipp falls outside your estate for inheritance tax an ISA doesn’t........ and so what if you break the lifetime alliance......

[@manishrana6]

@@philboyce1582 I agree inheritance tax is a major advantage, I think we must have both . More like 70/30 contribution to sipp and ISA . Do a rough calculaion for sipp and see in do not exceed LTA or u can always take help of financial planners like RTS

[@carlrobertsonmoney]

@@philboyce1582 Correct!

[@grantmail4112]

This was so helpful and just at the right time. If I have 2 separate banks both with ISA accounts... am I able to put £20k in each bank in the same Tax Year?.. or is that still limited to only one bank ISA ....a max of £20k per tax year per person.

[@Banthah]

You can only put in a max of £20k across all your ISAs in any one tax year. On top of that, whilst you are allowed to have as many ISAs as you like built up over the years, you can only contribute to 1 cash ISA and 1 stocks and shares ISA each year

[@grantmail4112]

@@Banthah Thanks Chris, yes, I found this out after my message.. but thanks for making it clear for anyone else.

[@russtidbury1569]

If you drawdown 5% of a £100k pension pot as a tax free lump sum leaving 20% TFLS remaining. If the pension remaining grows to £200K (🤩) and you decide to draw another £5k TFLS does your TFLS remaining drop to 15% or is the % remaining a higher value

[@carlrobertsonmoney]

When you decide to take out money from your pension in the form of a tax free cash lump sum you need to crystallise some funds. So if you wanted £5,000 as TFC you would 'crystallise' £20,000. £5,000 would be paid out tax free. You don't have to actually withdraw the other £15,000 (which is subject to tax) but it will go in to a segregated crystallised pot which remains invested. The other £80,000 is classed as uncrystallised and you can always take 25% of uncrystallised funds providing you have enough Lifetime Allowance.

[@stumac869]

If take you take money out of a pension (lump sum annually) would that still attract 25% tax free. Therefore could you take out £16,666 tax free - £4,166 (25% pension tax free) leaving £12,500 which is tax free under your annual allowance, subject to no other earnings. Is that correct?

[@carlrobertsonmoney]

Yes correct as long as your pension provider allows this method of withdrawal. Also Personal allowance is now £12,570.

[@edwardkenworthy7013]

Not quite. Your pension provider will assume you're going to withdraw that every month and deduct tax accordingly, which you will then have to reclaim at the end of the year. And that assumes you have no other income, in which case what are you going to live on?

[@edwardkenworthy7013]

Using your tax free lump sum is a terrible idea. You're just moving money from one tax free wrapper to another, whilst uselessly consuming your ISA allowance for anyone.