We'd like to remind Forumites to please avoid political debate on the Forum... Read More »
Tax when using part of SIPP to buy an annuity

RecliningInPeace
Posts: 8 Forumite

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.
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.
0
Comments
-
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.
1 -
RecliningInPeace said:
is the full 75% used and then I pay tax on the income the product provides? I presume the latter,A little FIRE lights the cigar1 -
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.0
Confirm your email address to Create Threads and Reply

Categories
- All Categories
- 350.2K Banking & Borrowing
- 252.8K Reduce Debt & Boost Income
- 453.2K Spending & Discounts
- 243.1K Work, Benefits & Business
- 597.5K Mortgages, Homes & Bills
- 176.5K Life & Family
- 256.1K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.1K Discuss & Feedback
- 37.6K Read-Only Boards