The Meaningful Money Personal Finance Podcast · Wednesday, August 5, 2026
Sarah asked about the best order for withdrawing funds in retirement between her ISA and pension pots to cover a seven-year gap before state pension. Pete Matthew advised drawing from taxable accounts like ISAs first, to allow tax-deferred pension funds to grow for longer. He clarified that the 25% tax-free cash from pensions can be used to help meet the annual withdrawal target.
“So, the general rule of thumb. Is that you should try to draw from your taxable accounts first. So, this would be your ISA. And you should try and leave your tax deferred accounts, which are your pensions, for as long as possible.”
“So, if you're wanting to achieve that 35,000 pound target, I'd be drawing all 15,000 pounds from your ISA first. And then using your pension pots to provide the remaining 20,000 pounds.”
“Also, given our goal of withdrawing 35,000 pounds a year for seven years, can we take advantage of the 25% tax-free cash allowance from the pension pots to help with this? And if so, how does that affect the order of withdrawals?”