It comes as the Triple Lock from the Department for Work and Pensions (DWP) promises to hike payments to a new level next year.
State pensioners urged to ‘move their money’ before letter arrives from HMRC
State pensioners are being urged to withdraw their money and open up a new one in the form of an ISA. It comes as the Triple Lock from the Department for Work and Pensions (DWP) promises to hike payments to a new level next year.
An inflationary increase in April could see pensioners dragged closer to the threshold where they are taxed by HMRC. But investing in ISAs could make state pensioners exempt.
If they swapped their savings or current accounts for varying form of ISAs, and kept within the £20,000 limit, they wouldn’t face the wrath of HMRC, personal finance experts say.
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SJP advised: “Since you don’t pay tax on the interest from a Cash ISA or gains and dividends from a Stocks and Shares ISA, you don’t need to declare them on your tax return.
“You keep any interest or returns you earn. You can invest a maximum of £20,000 per tax year in an ISA or combination of ISAs, so you could put half in a Cash ISA and half in a Stocks and Shares ISA depending on your need and goals.”
Depositing money into an Individual Savings Account (ISA) can enable you to make tax-free withdrawals as the funds from the account are not included in your taxable income calculation. This applies to Cash ISAs, Stocks and Shares ISAs, among others.
SJP said: “Unlike pensions, ISAs have no age restrictions to access your money (except Junior ISAs which cannot be accessed until age 18).
“That flexibility means you can have cash ready for rainy day emergencies, as well as for other goals you might be saving for, like a summer holiday or new car.
“Using a combination of pensions and ISAs is a smart way to plan for money you might need in the short-term, and savings you might need in later life.”