Can I Transfer My Pension to my ISA?

Is it possible to transfer my personal pension to my ISA? Are there any problems with doing this?

Question asked by Mark Long
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Answered by Neil Adams

No, transferring pension funds directly to an ISA is not permitted. However, a personal pension is usually a defined contribution pension and the pension freedoms do allow you to withdraw your pension at the age of 55. You’re free to invest this in an ISA if you wish.

However, think very carefully before you do this. Withdrawing a big lump sum from your pension could land you with an unexpected income tax bill.

Taking money out of your pension will leave you with less income in retirement, whereas if you leave the money invested in your pension it can still grow in a tax-efficient environment.

It’s also worth mentioning that there’s usually no inheritance tax due on an inherited pension, as a pension fund is usually classed as being outside your estate when HMRC values it on your death.

To assess your potential inheritance tax bill, Drewberry has built an Inheritance Tax Liability Calculator, available here →

Given the risks of withdrawing pension funds to invest in ISAs (e.g. the lack of tax-free investment growth and potentially sizeable income tax and inheritance tax bills), there are few circumstances where this is appropriate.

If you are considering doing this, it makes sense to seek professional financial advice first. Please contact us to see if we can help.

inheritance tax planning
This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
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