Tax on pensions ?

[lysa Cork]

Hi,

Excuse the ignorance, a simple query for most of you, if you pay into a pension now and get tax relief on the higher tax bracket, you still pay tax when you withdraw from the pension in later life, what tax saving is there, are you not just delaying the tax payment ?

Lysa.

 

[ClubMan]

you still pay tax when you withdraw from the pension in later life

If the pension income puts you into a taxable bracket then yes you will pay some tax.

what tax saving is there, are you not just delaying the tax payment ?

You can take up to 25% of your pension lump sum tax free at retirement. Also it is quite feasible that your pension income will be taxed at the lower rate or not at all rather than at the higher rate. Of course who knows what the tax rates will be in a few decades...?