SIPP Tax-Free Cash to ISA Strategy
Over the past two years, I’ve been withdrawing £40,000 of Tax-Free Cash (TFC) annually from my pension, splitting it equally between my partner’s and my ISA (£20,000 each). This has built up £80,000 across our two ISAs combined.
The rationale is to move tax-free money into ISAs early ahead of retirement so it benefits from compounding growth in a tax-efficient wrapper, rather than sitting in the pension.
The withdrawal strategy in retirement
The plan is to use the ISA as a cash buffer during the early years of retirement. By drawing from the ISA first, I can leave the pension untouched and growing, while avoiding income tax on those withdrawals entirely.
I also have a Defined Benefit (DB) pension paying £11,000 per year from 2027, which I’ll be taking.
The logic is straightforward paying less tax early keeps more money working. A simple illustration:
| Approach | Source | Amount Withdrawn | Tax Due |
|---|---|---|---|
| Pension first | Pension | £35,000 | ~£7,000 (total income £42,000) |
| ISA first | ISA | £35,000 | £0 |
By drawing from the ISA first, the full £35,000 is kept intact versus roughly £7,000 lost to tax if the same amount were taken from the pension. The pension is then left to continue growing in the meantime. I have to assumed that later in life I might need to pay 40% Tax, but I hope that the 12530 Tax codes double after 2031 or I will have to change my Strategy
See my Retirement Plan in the retirement calculator
My Net worth has risen £15,241 this month, £2,500 added to the Pension this month
| Date | Total Net Worth | £ Gain this month | % Gain this month |
| 16/06/2025 | £447,891 | £14,755 | 3.41% |
| 16/07/2025 | £474,068 | £26,177 | 5.84% |
| 16/08/2025 | £490,406 | £16,338 | 3.45% |
| 16/09/2025 | £510,518 | £20,112 | 4.10% |
| 16/10/2025 | £533,165 | £22,647 | 4.44% |
| 16/11/2025 | £535,587 | £5,591 | 1.05% |
| 12/12/2025 | £539,739 | £4,152 | 1.40% |
| 12/01/2026 | £550,380 | £10,641 | 1.97% |
| 12/02/2026 | £556,319 | £5,939 | 1.08% |
| 21/03/2026 | £549,551 | -£10,130 | -1.81% |
| 16/04/2026 | £547,917 | -£1,634 | -0.30% |
| 16/05/2026 | £562,081 | £15,241 | 2.79% |
| Yearly | £129,829 | 27.42% |
Plans ahead
There’s plenty to look forward to over the coming months. My daughter’s wedding is later this year a real highlight along with a trip abroad to celebrate.
On the retirement front, I’m approximately 11 months away, which feels close enough to be tangible. My main concern is avoiding the “one more year” trap, that nagging feeling that keeps pushing the finish line back. Being aware of it is probably half the battle.
In terms of investments, I’ve made a deliberate simplification moving out of Tech stocks and into Index funds and ETFs. It’s a sensible de-risking move as retirement approaches, trading the volatility of single-stock exposure for broader, more predictable market returns.
Exciting times ahead — the wedding, the travel, and retirement all within the same horizon.