If you can afford to, why not help your family? One-offs might be best for them and avoid expectations of a regular yearly gift (although you can give £3000 every year free of tax).
Think also of ISAs every year (just time to get in for this year).

I am in a similar position to you, having just retired with both a pension and a SIPP which I intend to take and exhaust if I can through flexible drawdown so as to save the eventual 55% tax on final payment to relatives.

First of all, to take flexible drawdown you have to have separate pensions totalling £20,000 in income each year. You have not mentioned that you have this and so if not, perhaps you should sacrifice some of your Pension to buy an annuity to do this, so as to give you the ability to do flexable drawdown.

Secondly you say you are going to take £5K tax free. It is my uinderstanding that you can only take the tax free element in one go but up to 25% of the capital sum. I would have thought it was far better to take that 25%, (£137,500) immediately and trickle feed it in to an ISA year by year so that your subsequent income is increasingly tax free and you have full control over that capital. Alternatively, you could live on the capital and pass regular sums to your relatives (IHT exemption - regular gifts out of income) so as to reduce your estate to IHT limits, as this seems to be an area you may be worried about.

Once you have taken the maximum capital sum and ensured you have other pensions of £20,000 then you could take as much as you can out of your SIPP each year, certainly to keep you within the 40% band and maybe even pay 40% so as to eventually avoid the 55% band.

Hope that helps

Use drawdown upto your 40% tax rate and so pay the 20% tax. Then consider VCT or EIS/SEIS investments with 5 year horizons above that level each year to get full tax relief on these and so over a period of years move the money out of the pension fund and into invests like ISA's or just taxable alternatives.

Your first decision is whether you want to spend it yourself, or give it to someone else. Might seem obvious, but if you are going to spend it yourself then you have to draw down the maximum allowed, grit your teeth and just pay 40% tax (given the GAD limits, you will still find the fund will grow if invested well).
If you want to give it to someone else without paying 40% or 55% on it, then you just have to marry someone or establish a dependant and they can take over the income stream after you. Given that you can form a civil partnership, or soon marry, with just about any other human with a pulse this is one final way of putting one over on the revenue. It's true what they say about death and taxes!

I looked at this problem in some detail recently. My calculations showed that the best way of maximising the net cash available to one's heirs was to leave the SIPP untouched until just before 75, then start drawdown (keeping that within the lower tax band). The reason for this is that the balance within the SIPP keeps growing in a tax free environment. You cannot replicate this by drawing funds off into ISAs because the limit is too low. I ran the calculations past my accountant and he agreed with the conclusions.

Incidently, I think you will find that the SIPP contents only passes tax free to heirs pre 75 as long as the fund has not been crystallised. Beyond 75, 55% applies whether crystallised or not.