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ISA vs SIPP: which to draw down first?

In UK early retirement the general order is: spend taxable accounts and ISAs first to bridge to pension age, then layer in the SIPP once it unlocks at 57 — drawing the pension tax-efficiently using its 25% tax-free element and your personal allowance. The reason is timing and tax: the ISA is tax-free and accessible at any age, while the SIPP is locked until 57 and mostly taxed as income, so it's usually best kept for later and drawn carefully.

The tax logic

An ISA is tax-free on the way out and has no age lock — perfect for the bridge years. A General Investment Account is taxed only on gains (Capital Gains Tax, with a £3,000 annual exemption), so it's cheap to draw in moderation. A SIPP gives 25% tax-free but the remaining 75% is taxed as income, and it's locked until 57 — so it pays to draw it once you can use your personal allowance and basic-rate band efficiently, rather than dumping it all in one year.

It isn't always ISA-first

The "spend taxable/ISA first" rule is a strong default, but the optimum depends on your numbers: a large SIPP can trigger higher-rate tax if left to grow and drawn late, and leaving ISAs untouched can be good for inheritance. The right sequence balances the bridge, your annual tax bands, and your later-life income — which is exactly what a drawdown-aware calculator works out year by year.

Model your own numbers — ISA/SIPP split, the bridge to 57, Monte Carlo and more.

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Frequently asked questions

Should I spend my ISA or SIPP first in retirement?

Usually ISAs and taxable accounts first — they are accessible before 57 and the ISA is tax-free — then the SIPP once it unlocks, drawn to use the 25% tax-free element and your personal allowance efficiently.

How is a SIPP taxed when I draw it?

25% of each withdrawal is tax-free; the rest is taxed as income at your marginal rate. Spreading withdrawals across years to stay in lower bands reduces the tax you pay.

Is a GIA or ISA better to draw first?

Both are accessible before 57. ISAs are fully tax-free; GIA withdrawals are taxed only on gains (with a £3,000 CGT allowance). Many plans use the GIA allowance each year and lean on ISAs to top up tax-free.

ISA vs pensionSaving for early retirement in the UK: pension gives tax relief but locks money until 57; ISA is tax-free and accessible any time. Bridge to pension accessIf you retire before 57 in the UK your pension is locked — you must "bridge" the gap with ISAs and taxable savings. UK safe withdrawal rateWhat a safe withdrawal rate means for UK early retirement — where the 4% rule comes from, why UK early retirees often use 3.25–4%, and how tax and a long retirement change it.

InflectionFI is an educational planning tool, not financial or tax advice. Figures are estimates based on your inputs and stated assumptions. Verify your situation with a qualified adviser.