Using a UFPLS to benefit from the Married Allowance

where_are_we

I am 64 years old and for this tax year 2015-2016 I plan to make a UFPLS of £2,884 from my SIPP to enable me to benefit from a transfer of Married Allowance of £1,060 to me. This would make my Personal Allowance £11,660. My only other income is an occupational pension of £9,500. My UFPLS will be made up of £721 (25% tax free) and £2,163 (75% taxable). This will bring my income up to £11,663 (£9,500 + £2,163). I will be taxed at 20% on the £3 of income over my Personal Allowance and so become a basic rate tax payer thus satisfying that Married Allowance condition. I will pay 60p income tax for the tax year on my income of £11,663. Have I got this right?

EdGasket

Looks right to me but I am still trying to figure out the difference between taking UFPLS and flexi-drawdown. I presume a similar scanario could be achieved with flexi-drawdown?

xylophone

http://adviser.royallondon.com/articles/updates/2015/january/fad-versus-ufpls/

jamesd

That looks fine.

Your pension money purchase annual allowance will be reduced from £40k to £10k but you probably aren't planning to work again so that won't matter.

You will be taxed initially as though you will be receiving £2884 a month so you'll start out paying too much tax. You can request a refund from HMRC once you receive the payment and it will probably arrive within a month or so.

Flexi-access drawdown can achieve the same result but you may not need the additional flexibility that allows you to do things like taking all of the 25% tax free lump sum from the whole pot now and bits of the taxable 75% whenever you like. You could use this flexibility to eliminate the 60p of income tax if you wanted to. Costs for using UFPLS or flexi-access vary between providers and might give a reason to prefer one to the other.