Tax when using part of SIPP to buy an annuity

RecliningInPeace

If I retired and took £200k of my SIPP into drawdown or as an UFPLS, my understanding is that 25% (£50k) would be tax-free cash and the remaining 75% (£150k) would be taxed at my marginal rate; as I access the drawdown account, or immediately for UFPLS.

But if I wanted to use the £200k to buy an annuity (or the £150k to be more accurate, as I'd presume it would be best to keep the TFC £50k rather than use it to buy taxable income), is the 75% taxed first and the after-tax amount used to buy the annuity, or is the full 75% used and then I pay tax on the income the product provides? I presume the latter, else there'd be double tax, but thought I'd check.

Thank you.

GrumpyDil

Taking an annuity is a different process from drawdown or UFPLS so no the money used to buy the annuity is not taxed

So, in your example you could take 50000 as TFC and the money available for annuity purchase would be 1500000.

ali_bear

RecliningInPeace said:

 is the full 75% used and then I pay tax on the income the product provides? I presume the latter, 

That is correct. 

squirrelpie

GrumpyDil said:

So, in your example you could take 50000 as TFC and the money available for annuity purchase would be 1500000.

Err, I think you meant £150,000 would be left rather than £1,500,000!

Always worth proofreading. Commas help.