ISA to pension transfer
If you are short of the funds needed to make maximum use of your pension contribution allowance it might be worth considering withdrawing some funds from your ISA.
The introduction of the Uncrystallised Fund Pension Lump Sum (UFPLS) facility has made it easier to access your pension. If you are nearing retirement, you can take advantage of a triple whammy: tax-free ISA withdrawals, tax relief on pension contributions and tax free cash to boost your savings. This is most effective for 40% and 45% taxpayers who are likely to pay tax at 20% in retirement.
Once UFPLS is used, the Money Purchase Annual Allowance is triggered, so a maximum of £10,000 can be contributed in future years. Provided you don’t make any further significant contributions, this is unlikely to be relevant. Leaving the funds in the pension wrapper means they are also free of inheritance tax. The following two examples demonstrate some of the possibilities: