My pension has reached the lifetime allowance. Should I put my savings into an ISA instead?

15 March 2021

Question by Marc

My pension has reached the lifetime allowance. Should I put my savings into an ISA instead?


Answered by Boring Money

Hi Marc

Great question. Unfortunately, with the Lifetime allowance's complexity, it is not possible to give you a yes or no answer without understanding and knowing your circumstances. The key considerations would be:

Are you employed and part of a workplace pension scheme. In which case, contributing to an Isa instead of a pension would mean losing your employer workplace pension contributions and the tax relief you receive to pay into a pension. Often even with the tax charge for exceeding the Lifetime allowance, you would be better off remaining in the pension scheme.

Is there any other overlapping tax considerations to take into account, such as inheritance tax and your income tax rate.

How long until you retire?

What is the purpose of the money, and would the Isa help you meet that purpose if you cannot save it into a pension?

Do you qualify for any Lifetime allowance protection.

This is a complex planning area where good financial planning and technical expertise can support you in making the right decision. I hope this gives you some guidance and support.

Keep well

Helena

Answered by

Boring Money