Pension options

jen0dorf

Hi

probably a silly basic question but can someone put into plain english the difference between

Flexi Access Drawdown and UNcrystalised Funds Pension Lump Sum.

I keep gettng told but it just is not sinking in.

They both appear to let me have 25% tax free and then let me have funds as and when I need them paying tax if above my tax limit.

So arn't they both the same?

thanks

Ian

dunstonh

Flexi Access Drawdown and UNcrystalised Funds Pension Lump Sum.

Flexi access drawdown is where you remain invested but draw an income from the pension.
UFPLS is an ad-hoc lump sum withdrawal that accesses the taxable part pension as well as the tax free amount without the need to put the plan into drawdown.

They both appear to let me have 25% tax free and then let me have funds as and when I need them paying tax if above my tax limit.

Drawdown is income and UFPLS is lump sum.

There are variants as well. Phased flexi-access drawdown where you take the income as 25% tax free and 75% taxable. If you only wanted the 25% but not any of the 75% then you would need a drawdown plan to do the crystallisation.

jamesd

jen0dorf wrote: »

Flexi Access Drawdown and UNcrystalised Funds Pension Lump Sum. ... They both appear to let me have 25% tax free and then let me have funds as and when I need them paying tax if above my tax limit.

They don't both do that.

With UFPLS you always have to take 25% tax free lump sum and 75% taxable income. even though the 75% is being taken as a lump it's still taxed as income and you'll get a payslip for each month in which you take some UFPLS money.

With flexi-access drawdown you can take 25% tax free lump sum and as much or as little as you like from the taxable 75%. Again anything you take from the 75% is taxable as income and you'll get a payslip for each month in which you do it.

Knowing that the 75% is always taxed as income is important to let you know that it's a bad idea to take a lot because it can push you into very high income tax rates. Those leaving the UK can also find the 75% taxed at nil income tax rate depending on where they are living outside the UK.

jen0dorf

Thanks for the clarification seems like flexi acccess draw down might be best for me as I dont want to draw the 25% and don't need the income at the moment.

One more question with the flexi draw down can I leave any remaining funds to my wife/children?

thanks for the quick response I am finding this worrying:T:T

Ian

jamesd

Yes, you can leave all money that you haven't taken to wife and/or children. Includes money in flexi-access drawdown and money that you haven't put into drawdown at all. An expression of wishes form is the way to do this because pension money is outside a person's estate and not governed by their will.

dunstonh

Thanks for the clarification seems like flexi acccess draw down might be best for me as I dont want to draw the 25% and don't need the income at the moment.

If that is the case, then why is any drawdown needed? If you dont need the 25% element or the income then dont put it into drawdown.

One more question with the flexi draw down can I leave any remaining funds to my wife/children?

Yes. Just the same as the accumulation stage.

jen0dorf

Hi

again thanks for the info, especially the last bit.

I have another policy that we are going to "Cash in" so don't need any benefits from the other one as yet.

I was under the impression I had to cash it in. Regrettably whilst my financial adviser comes highly recommended and no doubt is very good at his job, he seems to only offer advise in response to questions which is great if you know the questions to ask- which I don't.

thanks a lot for the clarification

Ian

dunstonh

I was under the impression I had to cash it in.

You are not required to make any decisions until age 75. Irrespective of what the scheme retirement age is (caveat - there are some plans that cease to attain extra benefits after scheme age - these are mostly old fashioned/niche or hybrid plans - unusual but do exist).

Regrettably whilst my financial adviser comes highly recommended and no doubt is very good at his job, he seems to only offer advise in response to questions which is great if you know the questions to ask- which I don't.

it can depend on the service you employ the adviser under. If it is a transactional service then it will be more reactive. If it is ongoing servicing then you tend to find its a long term ongoing dialogue and through that, the adviser will know your situation well.

xylophone

http://adviser.royallondon.com/technical-central/pensions/benefit-options/ufpls-explained/

https://www.hl.co.uk/free-guides/ufpls?theSource=PCGSN&Override=1&adg=G+SIPPENG+UFPLS&gclid=CO-r2p6Ui9ACFUITGwodxP4HVg

http://www.scottishwidows.co.uk/retirement-planning/pension-options/flexible-pension/

may be worth a browse.

jamesd

jen0dorf wrote: »

I was under the impression I had to cash it in.

Depends on the particular pension but normally you'd just be able to transfer to another one if the old one was say closing the whole product you were in.

jen0dorf wrote: »

I have another policy that we are going to "Cash in"

What sort of 25% tax free and 75% taxable values would be involved in cashing in that one? I'm asking just to check that you're not doing something that wastes a lot of money on income tax.

jen0dorf

Thanks for all the advice which I shall carefully read over the next few days.

IN answer to the question raised my smaller policy is for £16000 so with the 25% Tax free that would leave £12000 taxable and as I'm already semi retired the tax hit would not be huge,

The plan is to use this sum for a good holiday to celebrate retirement and then place the rest in some for of account paying interest and use it as a fund for Xmas, birthdays unforseen disasters.

Thanks Again

Ian