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At age 55 Dave earns £95,000 per annum and makes a £20,000 (net) pension contribution and a £20,000 ISA contribution.
Both investments grow at 2.5% per annum in real terms (meaning 2.5% above the rate of inflation and net of charges) over 10 years.
On ceasing work at age 65 Dave decides to draw both investments as a lump sum. As he has no other income he is a Basic Rate taxpayer.
If Dave was a 40% taxpayer in retirement, the additional return provided by the pension would be reduced to £1,800.
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