Multi asset ETF for S&S ISA

Alexland

The 75% is taxed as normal income within the tax year that you draw it. So if you draw out a large lump sum it would be like having a really well paid job in that tax year.
The trick is to draw the pension at a sensible rate such that you remain within basic rate tax in retirement and the money lasts the remainder of your life.
As such your additional pension contributions are deferring the income until it can be drawn at a lower tax band.

barmeysmb1

ah...penny droppped, so its the actual amount you withdraw above the 25% that determines the rate of tax ?

Scenario example
1. Work 20 yrs paying 40% tax
2. Retire, whilst at the same time rate
3. Withdraw 25% - no tax
4. Withdraw 50k extra (same year).....taxed at 40% or withdraw 30k extra, taxed at basic rate

Sound right ?

Alexland

Yes if you draw out the 75% too quickly it could cause you to pay higher rate tax on some of it. Remember that a pensioners income also includes state pension. If you put enough into your pension you might become a basic rare taxpayer in both employment and retirement.