7.6 Tax Treatment
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In the accumulation phase, approved pension schemes are probably
the most tax efficient investment available in that tax relief is
available on input, and funds are taxed advantageously.
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Once in payment, they are treated like any other earned income
and taxed under the PAYE system.
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A more tax efficient income may be obtained from the purchased
life annuity, which pays out as part taxable annuity, part non-taxed
return of capital. It may be worth investing the tax free cash sum
at retirement in such an annuity, rather than having the whole pension
paid from the fund and taxed at the full rate
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