Avoiding 40% tax in SIPP drawdown

fizio

MetaPhysical said:

I like to zoom out and think of the bigger picture and think of it more as my "blended" income tax rate I am taking a hit on across all my sources of income.  If you're taking UFPLS, say, and considering your personal allowance then even if you step over the 50270 threshold and take an income of say 60k, you're only changing your "blended" tax rate by a relatively small amount. Why limit the enjoyment of your retirement just because of a psychological aversion to a bit of extra tax?  By all means avoid 40% tax if you can but don't let it stop you living the life you want.

I agree with your points that getting money into the pension has too many advantages to ignore. My only point is that I will pay 40% tax when I withdraw it (and that ok) but as I don't need to spend the money, I will put it into an ISA and buy the same investment so over a number of years my drawdown pot will end up in my ISA. I don't see much upside or downside to doing this but feel having it all in an ISA protects it from more government shenanigans. 

I am used to maximising ISA every year but no longer working means the company bonus's etc are not available anymore and drawdown is the main lump sum I can use to carry on increasing the ISA - and then withdraw when I want a fancy car/holiday/etc.. 

eltisley98

MallyGirl said:

eltisley98 said:

penners324 said:

Why so worried about paying 40% tax?

Surely it'll lead to increased quality of life? Ie spending it. 

I guess if you pay 40% tax on your pension income, there is no longer an advantage compared to paying 40% income tax while working and putting the money into an ISA rather than a pension scheme? Growth wise I don't think an ISA and a pension differs that much.

If you contribute to a pension by salary sacrifice then you also benefit from paying less NI and some employers also give some/all of the NI they save too.

Good point.

It feels like we dodged a bullet in the last budget, but let's see if this perk will survive for long.