ISA's and Pensions

For most individuals the plan is to arrive at their retirement date with a healthy pension pot and considerable savings in their ISA accounts.  But how should these investors juggle the two pots of money?  Should one account be drawn down before the other

The overhaul of the pensions system with the launch of the “pension freedoms” has changed how this balance works.  The pension freedoms mean that individuals no longer have to buy an annuity fee with their pension money at retirement

Instead they can keep their money invested and draw an income from it.  More attractive still is the fact that pension assets can be passed on after death free of inheritance tax.  This is not the case with ISA assets

For pensions the full value can be passed to a beneficiary inheritance tax-free, provided the pension-holder dies before the age of 75.  If they die after age 75, the pension can still be bequeathed tax-free but the beneficiary will pay tax or up t0 45pc if they take a lump sum.  The other downside is that the money held in an ISA account is considered when assets are assessed for means-tested benefits or for care home fees.  This is not the case with pensions.