Pension 2 – Four accounts

Here’s a diagram that we’re going to develop more later.

With many investment platforms, you can get the same choice of investments in a SIPP, in a Drawdown, and in an ISA. All growing tax-free. If we include a current account (or a related cash savings account), it means that you can hold your pension fund in four places.

The SIPP and DC pension are pretty similar. They are the least accessible, but the 25% tax-free cash tied to withdrawals from them is very important.
Drawdown accounts are not much more accessible, but they no longer count towards the Lifetime Allowance.
ISAs (stocks and shares ISAs) are like an accessible savings account, offering a wide range of investments.

I assume that if you manage to move a lot of your pension across to your ISA, you will have hundreds of thousands of pounds in ISAs, and you will draw on it responsibly as a pension, rather that blow it. If it helps, consider having one ISA only for your pension money and have a different ISA for blowable money.

There’s a fifth account worth a mention.  If I have money that needs investing coming into my current account faster than I can put it into an ISA, then I will have to use a Stocks & Shares Account that is not in an ISA wrapper.  I’ll have to get my head around dividend tax and capital gains tax.  I’m hoping I can avoid this but it may happen if I’m worried about exceeding the LTA and so need to move money from SIPP to Drawdown more quickly than I’d planned.  But LTA is a different subject.

I’ve ignored other investment vehicles such as VCTs and Buy-to-let. By maximising my ISA & my wife’s ISA, we can achieve what we want. We’re not super-rich.