MrFoolish wrote:It would be much simpler if the rule was everyone can take out X pounds per year tax free and anything more is taxable. This would be more progressive too.
Err, they can.
Last time that I checked, the personal income tax allowance applied to pensions as well.
The allowance is £12570. If you combine that with your 25% by using UFPLS then you can take out £16,760* each before you pay tax.
Assuming that you are not old enough to draw the state pension.
If you are then you need to reduce what you take, in order to avoid tax as income from the state pension is not excluded from the calculation.
YES I have thought about this and the numbers are from my spreadsheet.
I've been retired almost a year and as yet have not touched my pension for tax reasons.
In my case to mitigate IHT. Basically I currently need to spend my ISA in order that the least tax is paid. Yes I'm sacrificing my income tax personal allowance in order to reduce the IHT my estate may pay. (it's an ideological thing)
*Ps this study claims that £16,760 is more than the minimum that you "need".
https://www.retirementlivingstandards.org.uk/
Top things up with income from ISA's and you need pay no tax for a "moderate" or even "comfortable" lifestyle.