Hundred SummersTax-free cash now or later: take the lump sum into an ISA, or leave it?
Take the pension's tax-free quarter now and move it into ISAs, or leave it invested in the pension? What each route leaves you, and your beneficiaries, in today's money. Your figures never leave your browser.
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Worked example
Computed when this page was built by the same engine that runs the calculator above, so the figures below and the live tool can never disagree. Change any input above to see your own.
| Inputs | |
|---|---|
| Pension pot | £400,000 |
| Age now / compared at | 60 / 75 |
| Growth / inflation | 5.0% / 2.5% |
| ISA allowance free | £20,000 a year |
| Tax rate: you / beneficiaries | 20% / 40% |
| Results | |
|---|---|
| Tax-free cash now | £100,000 |
| Years of ISA allowance to move it in | 6 |
| For you at 75, taking it now | −£2,906 |
| For beneficiaries after death at 75, taking it now | +£54,511 |
The next question
What would my beneficiaries keep from the pension? →Inherited pension calculator
Or answer it with everything else: the full Hundred Summers plan connects your pay, pensions, savings, property, tax and spending year by year, and stress-tests them across 500 simulated market histories.
Read the guides
- Pensions and inheritance tax from April 2027 →The biggest pension rule change in a decade: unused pension pots join the estate for inheritance tax from April 2027; what changes, the double-tax effect after 75, and how it rewrites the 'spend the pension last' doctrine.
- What happens to your pension when you die →Nominations and scheme discretion, the age-75 line that decides whether your beneficiaries pay income tax, beneficiary drawdown, what defined benefit schemes pay, and how the April 2027 inheritance tax change rewrites the answer.
- The 25% tax-free lump sum: take it now, take it in slices, or leave it →The £268,275 lump sum allowance, PCLS versus UFPLS, the recycling rule, why the recurring 'take it before the Budget' panic usually costs money, and how April 2027 changes the case for leaving it in.
Why it is close for you
Up to a quarter of a pension can come out tax-free, capped by the lump sum allowance of £268,275. A quarter of a pot that has grown is the same as a quarter taken earlier and grown in an ISA, so for your own spending the routes differ only if growth would take your quarter above the allowance (then taking it first protects it), or the cash has to wait outside an ISA, taxed, until the £20,000 yearly ISA allowance takes it in. Taking it also moves the rest of the pot into drawdown (or an annuity), which doesn't on its own trigger the money purchase annual allowance.
Where it matters: death at 75 or over
A pension passed on before 75 is free of income tax. After 75 everything left in it is taxed as the beneficiaries' income, including the quarter that could have come out tax-free; an ISA passes without income tax. Inheritance tax treats the two alike from April 2027, when unused pensions join the estate. The inherited pension calculator shows what a beneficiary keeps, and the tax-free lump sum calculator the lump sum against taking a quarter of each withdrawal.
Sources
- gov.uk, Tax on your private pension: lump sum allowance.
- gov.uk, Tax on a private pension you inherit.
- gov.uk, Individual Savings Accounts.