Alternatives to Annuities

jamesd

I don't know about you but 40% or 20% income tax looks like a guaranteed loss on withdrawing to me unless planning appropriate for the individual is used to reduce it.

The problem is the 75% being taxable, not just a non-zero tax rate on it. It's a problem whatever taxable income level is being used, whether it's 40-50 year sustainable that a 55 year old might use or something faster.

dunstonh

I don't know about you but 40% or 20% income tax looks like a guaranteed loss on withdrawing to me unless planning appropriate for the individual is used to reduce it.

Not drawing it means there is no loss due to tax. If he draws an income that would be taxable. However, an income from it is required. So, a small amount of tax is inevitable. Irrespective of the option chosen.

jamesd

Income tax isn't inevitable, that's where tax and other planning comes into play.

It's unlikely that I'm going to pay much income tax now or on withdrawing the taxable 75% from a pension. There are good investments around that have the useful additional benefit of eliminating the tax and those are suitable for me, so I'll use them. And I also like the social value of investing in new schools and care homes while getting the returns and tax relief.

That's assuming I stay in the UK. I might have a need to withdraw much of the 75% for investment visa purposes, in which case I'd first relocate to a place that has 0% income tax on pension income and a suitable tax treaty with the UK, then move on to the final destination if it's not that one.*

*Anyone considering this should realise that it requires staying outside the UK for many years or paying the tax as if you were in the UK. It's only normally available from age 55. It's completely within all relevant laws with all applicable taxes paid to the relevant tax authorities, unlike pension liberation schemes.