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Should I cash in my pension and add the lump sum approx. £10,000 to my investment ISA?

19 May 2022

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Question by Caroline

I have a very small private pension and other investments. Should I cash in my pension and add the lump sum approx £10,000 to my investment ISA?


Answered by Joshua Gerstler

Hi Caroline,

This will depend on your circumstances and what the pension money is for.

You have to be at least 55 to cash in your pension.

25% or £2,500 of it will be tax free.

The other 75% or £7,500 will be taxable so if you have other income, you will have to pay tax to cash it in.

Do you have children (or others you want to leave money to)? The pension can be passed on upon death with no Inheritance Tax to pay. The ISA would be liable to Inheritance Tax.

Do you have other pensions? Another option would be to consolidate this pension into your others.

What other methods do you have to provide you an income in retirement? If this is your only method then you may want to keep it.

These are just a few of the areas you need to consider before making a final decision.

I hope that helps.

Joshua Gerstler
FPFS, Cert SMP, FCA
Chartered Financial Planner

Answered by

Joshua Gerstler

Chartered Financial Planner

I have been working in Financial Services for over 16 years. I started out at Deloitte where I trained and qualified as a Chartered Accountant before moving to Financial Advice/Planning at The Orchard Practice in 2011.