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You pay income tax on withdrawal or income from annuity but there’s no cap gains to pay and yea there’s the 25% tax free.
Typically folks are in a lower tax bracket on the withdrawal compared to the paying in. Obvs. there are exceptions.
Howard-
Yeah, I guess you can just tune it so you're in lower bracket whereas if you're a high earner you're screwed somewhat (unless you dump everything into a pension or you can afford all the dodgy tax accountants or you're a fraudy sorry I mean Tory and can hide your money in some company or fund or PPE misdealings or whatever)
hippy
You pay income tax on your pension withdrawals if your total annual ‘non-savings, non-dividend’ income is more than your personal allowance – the amount every person is entitled to earn before they start paying income tax. For the 2023/24 tax year the standard personal allowance is £12,570.1
Your total annual non-savings, non-dividend income could include the State Pension, a private person or workplace pension, earnings from a job or self-employment, income from a rental property and any taxable benefits.
You’ll pay basic rate income tax at 20% on total annual non-savings, non-dividend income between £12,570 and £50,270. Above this threshold you pay a higher rate of 40% – and on income above £125,140, you’ll pay tax at 45%.1 Also, if your total income is greater than £100,000, then your personal allowance will be reduced by £1 for every £2 of income you earn over £100,000.
You save tax by paying into your pension but then cop it when it pays out. So, what's the benefit? If you live cheap you pay less tax overall?
Oh, there's a 25% tax-free lump sum rule? So, some of your pension is tax free?