For years, retirement drawdown advice was often boiled down to one simple rule: spend your cash and ISAs first, and leave your pension until last.
In many cases, that was sensible. But from April 2027, it may no longer be the default answer. That does not mean everyone should suddenly start spending their pension first. It means the old rule needs more thought than it used to. The right answer will depend on your tax position, your estate, your income needs, your age, and what you actually want your money to do.
Why the old “pension last” rule is weaker now
The traditional logic was straightforward. ISAs are flexible and easy to access, but they usually form part of your estate for Inheritance Tax. Pensions, on the other hand, have often been one of the most tax-efficient assets to leave behind.
That is why many retirees were told to spend cash first, then ISAs, and preserve the pension for as long as possible. From April 2027, that becomes less clear-cut. If unused pension money can be brought into the Inheritance Tax conversation, preserving the pension at all costs stops being the obvious move it once was.
So the question is no longer: “Should I always leave my pension until last?”
It is now: “Which mix of pension, ISA, cash and gifting gives me the best outcome?”
That is a better question, because it reflects real life.
Your money is there to support your life first
This is the most important point. Retirement planning should not become a game of trying to protect one wrapper at all costs. Your money is there to support your lifestyle, your security and your flexibility first.
So if your pension is the right place to draw income from, use it. Do not leave it untouched just because that used to be the standard answer. Good planning is not about following an old rule. It is about making sure the money works properly for you.
Do you actually have an Inheritance Tax problem?
Before doing anything else, start there. If your estate is unlikely to be large enough for Inheritance Tax to be a real issue, this rule change may matter less than the headlines suggest. But if your estate is already likely to face Inheritance Tax, then pensions now deserve a fresh look. What used to be an obvious estate-planning advantage may be less valuable than it once was.
That does not tell you exactly what to do. But it does tell you this: the old default may no longer be safe to rely on without thinking.
Should you still spend ISAs before pensions?
Not automatically. ISAs are still hugely valuable in retirement. They are flexible, clean and tax-efficient while the money remains inside the wrapper. That makes them extremely useful. But they have usually sat inside the estate for Inheritance Tax purposes. That is one of the reasons people often spend the ISA first and preserve the pension.
From April 2027, that contrast becomes weaker. That does not make ISAs less useful. It just means they should no longer be treated as the obvious pot to run down first in every case. For many people, the better answer may now be a blend of pension and ISA withdrawals, rather than protecting one and emptying the other.
Why age 75 still matters
This remains important. Even after the 2027 change, the age at death can still affect how attractive a pension is to leave behind. Broadly speaking, inherited pension benefits can look very different depending on whether death happens before or after age 75. That means pensions may still be a very good asset to preserve in some circumstances. But for someone who is older, in good health, and likely to die after 75, the case for leaving the pension untouched forever may be weaker than it used to be.
That is where it becomes sensible to ask whether taking more pension income earlier might actually be the better long-term decision. Not always. But often enough that the question now needs asking.
Could gifting now be part of the answer?
Possibly.
This is the part many people miss. If you are comfortably retired and are unlikely to spend everything, the issue is not just whether to draw from your pension or your ISA. It is also whether some of that money ought to leave your estate earlier. For some families, gifting may become a more important part of the conversation. That might mean one-off gifts. It might mean regular gifts out of surplus income. It might simply mean being more honest about how much money you are likely to need and how much is just sitting there by habit.
A lot of estates become tax problems because people stay in accumulation mode for too long.
A better rule of thumb from April 2027
Do not ask which account should always be spent first. Ask which combination of pension, ISA, cash and gifting best supports your life and your family, after tax, under the new rules.
For some people, the answer will still be to leave the pension until last. For others, the better answer will be to draw more from the pension earlier, use allowances sensibly, keep enough ISA money for flexibility, and think more seriously about gifting. The point is not to replace the old rule with a new, rigid one. The point is to stop following the old one without thinking.
