Moving ISA to a SIPP?

[Wonderbug81]

Can I move a stocks HSBC ISA into a Vanguard SIPP?

If so, can I claim the pension tax back on this?

I hadn't realised when I first started investing that you could pay into a SIPP otherwise I'd have done that in that first place!

Higher rate tax payer, I have a workplace pension too but nowhere close to maxing out my £60k limit, even with this payment.

Why do you want to put it in a SIPP instead?

Yes. You don’t have to say where the money has come from. Put it in the SIPP, I think they claim back basic rate tax and then you can fill in a tax return to reclaim the higher rate or just send HMRC a letter claiming it and you should get a rebate.

Because SIPP deposits are tax free so worth 40% more than putting it into an ISA

As @Shuffletoesxtreme says, for the tax relief (if that's possible, I'm trying to understand if it is or not).

But open to hear opinions as I'm still getting around all things financial planning!

If I'm better off just moving it into a Vanguard ISA then I'll do that.

Taxed on the way out though, and of course you’re limited as to when you can take it out.

So a SIPP isn’t necessarily the better option, given the tax free nature of the ISA wrapper, depending on OP’s situation.

And of course they keep changing the pension rules!

Does your workplace offer sacrifice sacrifice for pension contributions?

I already have other ISAs and I'm not too far off from being able to access pension money if I needed it.

Yes it does and I make use of it.

Can I put the ISA money into a workplace pension? To be honest I wanted to spread the risk which is why I now have the SIPP. There's not much money in it right now so I need to start topping it up.

You only save tax that you have paid in the current year. So eg if you earn £70k, you will have ~£20k of gross pension contributions you’ll save 40% tax on, and then anything more than that you’d be saving 20%. And the maximum you can put in in any year is the total you have earned in that year - you can’t save tax against earnings from previous years

Ah Ok so I'd be better off just moving from one ISA to another and leaving it?

Yes you can, you can put up to 3 tax years allowance into a SIPP.

You can only receive tax relief on pension contributions up to 100% of your relevant UK earnings in that tax year, even if you have carry forward available.

To clarify, the ISA was started 10 years ago so I think it falls outside the 3 year window if I've understood correctly.

I do have a newer ISA (started less than 3 years ago) so maybe I move that into the SIPP instead?

Kindly OP, I think it's worthwhile you getting to grips with the basics before you make any decisions here. Rebel Finance School and Meaningful Money are often touted as good resources.

You need to be clear on what your reasoning is for your investment decisions. You've said above that you want to "spread the risk" - what do you mean by this?

As to your latest post, when you started your ISA has no relevance on whether you can move money into a SIPP.

Thank you. By spreading risk I meant putting my money in a couple of different index funds e.g. Vanguard for my SIPP as my work pension is in Fidelity. That may of course change in future and I'll then reassess.

And the point re year of starting my ISA was related to that fact that I understood that if I had any allowance left from earnings (up to the £60k limit) from the past 3 years I could put them into my pension. It sounded as though that meant that if I had put my money into an ISA in the past 3 years and I hadn't yet used allow my earnings allowance from the past 3 years, I could claim the tax relief back.

I do understand the basics but what's tripping me up here is whether I'm leaving money on the table with ISAs when I haven't fully made use of a SIPP as a higher earner.

Lots of people misunderstand the Annual Allowance and carry forward. Carry forward just allows you to potentially be able to put more than £60k in a pension in the current year without a tax bill. But your maximum pension contribution is still limited to this year’s earnings, and you can only save the tax you paid this year (so if you earned £100k this year and £100k last year and put £80k into a pension this year (and nothing last year) you only save 40% tax on the bit of this years earnings you paid 40% tax on - the fact you didn’t use any of the potential tax advantage last year isn’t relevant.

As an old person, I can tell you that stocks and shares ISAs saved over years are a very good investment for old age. You don’t pay any tax when you start drawing down on them.

Both your SIPP and your ISA should allow you to select all sorts of different funds to invest in - it sounds like you are confusing the company that is providing the service (Vanguard, Fidelity) with what the funds are actually invested in.

As P00hsticks says, if your goal is investing in different funds, you don't need to move wrappers to do that, you can diversify investments inside your current ISA.

Your annual allowance for pension contributions and your ISA history are entirely separate things - I think you are conflating a few points here.

Going back to your original question, you absolutely can withdraw £X from your ISA and contribute £X to your SIPP.
The SIPP provider adds 20% basic rate relief automatically. If you are a higher rate taxpayer, you then claim the extra relief via self-assessment or by contacting HMRC. The fact that the money came from an ISA doesn’t change anything; it’s treated like any other pension contribution.

But, as Posie said, you would still only get the higher rate relief based on your earnings in the year. So bear this in mind if you're hoping to maximise the 40% relief.

That's whether you CAN do it, but SHOULD you do it is equally important. There are lots of articles online discussing ISAs vs SIPP which you may want to look at. In summary, this comes down to accessibility and flexibility vs tax treatment. There is no right answer as it will depend on individual circumstances although there are some key questions to consider before deciding one way or the other.

Your ISA growth and income is totally tax free right now.
If you move some of your ISa to a sipp, you might get the 40% tax relief, but when you withdraw it only 25% of it will be tax free.
The rest of what you take will be subject to income.tax as normal, at either 0%, 20% or 40%, depending on how much you take. If your investment grows considerably in the time before you take your pension then you could end up paying more tax than the tax rebate of 40%

Also, you are talkinh about spreading risk by using both ISA and Sipp, but that isn't what spreading risk means.

Let's say all your ISA was in a vanguard UK footsie 500 index find, and all you fidelity pension was in and HSBC footsie 100 index find, and the UK stock market plummets, the entirety of your invested funds will plummet and you'd beat hope you don't need to draw any income until the stock market recovers which could be a few years.

So what you need is a spread of investments, across the world, across many different market sectors (ie technology, health, mining, utilities etc) at different risk levels (s&s, cash, property, bonds, gifts etc)

Depending on your age you can contact pension wise for free guidance