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  1. #1

    ISA to SIPP transfer in retirement

    I am 64 and retired. I hold ISAs and SIPP. As I do not contribute into the SIPPs, I beleive I have 40k allowance which I can use. If I transfer 40k from my ISAs to SIPP, what are the advantages please? My current income comes from ISA and SIPP withdrawals.

  2. #2
    You are retired! The rules for paying into a pension,. SIPP or otherwise, stipulate that the maximum you can contribute in any one year is 40K out of Net Relevant Earnings i.e. income from employment or self employment. Otherwise it is a maximum of 3600 Gross (2880 net).

    Thus you can transfer 2880 from ISA to SIPP each year and HMRC will make it up to a gross of 3600. But as you are not working, the 40K allowance is not available.

  3. #3
    You can invest up to 40k pa gross or the equivalent gross value of your earnings for the tax year, whichever is lower.

    However, if you're already drawing on a pension, you can only invest a maximum of 4,000 gross pa if you're earning or 3,600 if you're not.

  4. #4
    As stated above, you can contribute 2880 to your SIPP each year. The government will top this up with an additional 720 i.e. 3600 in total. When you withdraw, 25% is tax free, which would leave a potentially taxable amount of 2700 (if you have exceeded your tax free threshold). Assuming this, you will pay 20% income tax on this amount, the tax due would be 540. A net gain of 180.

    Another point to consider is inheritance tax. Your SIPP would be IHT free, but your ISA wouldn't be. If it's important for you to reduce your IHT liability, then it would make sense to take income from your ISA, rather than from your SIPP, until your ISA is exhausted.


 

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