SIPP v ISA @ 60?

[swee'pea99]

Age 60 and reviewing my options....

In addition to a decidedly modest pension fund, I also have a chunk of savings, currently languishing in a deposit account at ha-bloody-ha per cent. Thinking to invest maybe half of it in an anticipated stock market recovery over the next few years, I'm minded to use either a SIPP or an ISA as the vehicle. But I'm not sure which to choose.

As I understand it, if I invest £8,000 in an ISA I have an £8,000 fund from which I can then make withdrawals tax free, without any strings attached. If I invest £8,000 in a SIPP, the government will add another £2,000, so I have a £10,000 fund, but when I want to take money out, only the first 25% can be taken tax-free; the rest is subject to tax.

So far so correct?

If so, on the face of it the SIPP looks like the better option: I get a quarter more shares for my money, and if I'm careful in my drawdowns, I should be able to keep my future tax burden low. All the ISA v SIPP things I've been looking at online say: 'But - you won't be able to access your money from a SIPP till you're 55'. Well, since I'm 60 that's not a big problem. So, does that make it a no-brainer? Should I (can I?) put my 'chunk' directly into a SIPP with, say, the Vanguard Target 2030 retirement fund (as recommended on related threads hereabouts), and then just leave it alone till I need to draw funds from it (I have no plans to be an active investor - this would be strictly set & forget)? Or am I missing something?

Thanks for any advice/recommendations/thoughts.

 

[sheddy]

Can't help but maybe take a look at the Boring Money website.

 

[All uphill]

I opened a SIPP when I was 60. The 25% from the taxman is very welcome, and despite covid I am well up through dividends and stock growth.

I have yet to take any money out, but understand the first 25% comes out tax free.

It's a big👍from me.

 

[Erasmus]

Also, depending on:

• when you need your money
• rules/flexibility of SIPP platform you use
• your other taxable income at the time

you may be able to take out more than the 25% without incurring tax if you do need it.

This worked for me when I retired a tiny bit early, and was mostly living off scraps of savings. Using your £8k as an example, I'd put it into my SIPP, and then the next tax year (no other taxable income), I'd "crystallised" the £10k after mark-up, giving £2,500 TFC, and the remaining £7,500 as monthly drawdown. As the £7,500 was within personal allowance, and no other taxable income, I was able to take £10k in full the year after paying £8k in.

Sounds like you're not planning to use it soon, but it is an option (if stocks don't crash again) to give a bit of flexibility. Also (and others may tell me I'm wrong), but can't really see the advantage of an ISA for most of us at the moment - the main consideration is what gives best interest, potential growth, and of course the 25% mark-up.

Good luck, whatever you decide, John.

 

[swee'pea99]

Also, depending on:

• when you need your money
• rules/flexibility of SIPP platform you use
• your other taxable income at the time

you may be able to take out more than the 25% without incurring tax if you do need it.

This worked for me when I retired a tiny bit early, and was mostly living off scraps of savings. Using your £8k as an example, I'd put it into my SIPP, and then the next tax year (no other taxable income), I'd "crystallised" the £10k after mark-up, giving £2,500 TFC, and the remaining £7,500 as monthly drawdown. As the £7,500 was within personal allowance, and no other taxable income, I was able to take £10k in full the year after paying £8k in.

Sounds like you're not planning to use it soon, but it is an option (if stocks don't crash again) to give a bit of flexibility. Also (and others may tell me I'm wrong), but can't really see the advantage of an ISA for most of us at the moment - the main consideration is what gives best interest, potential growth, and of course the 25% mark-up.

Good luck, whatever you decide, John.

Thanks a lot. I'm leaning toward the SIPP at the moment. I should've mentioned one significant factor, which is that I don't really have any idea when I'll need to start cashing in - my income is pretty unpredictable, and could disappear without trace at a moment's notice. I would hope to be able to treat this SIPP (or possibly ISA) as kind of like a deposit account, for about five years, maybe more, but it could be that I need to start drawing on it before that. But either way, I think it still sounds like SIPP.

Can't help but maybe take a look at the Boring Money website.

Many thanks - I've sent them a query, so we'll see what comes of that. I like the look of that site! Never heard of it, so thanks for the tip.