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:
Related case studies
At age 55 Dave earns £95,000 per annum and makes a £20,000 (net) pension contribution and a £20,000 ISA contribution.
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Coming into money isn’t something that happens often. Before you commit yourself to spending, investing, giving gifts or even giving up your job, here are some tips on how to make your windfall work for you in the long run.
EQ is a Chartered Financial Planning firm able to offer a wide range of services to private clients including tax optimisation, retirement income planning and estate planning.
The April 2015 Budget saw the most radical changes to the pensions landscape for a generation, but the new flexibility on offer is only available to personal pension holders. Members of final salary schemes can only access the new rules by transferring to a personal pension.
This guide explains how planning ahead of time can provide for – and in most cases reduce – the amount of tax that is ultimately due on your estate.