Ufpls??

billpaul812

Not quite got this as my question will probably demonstrate!

Is UFPLS simply a way of accessing a SIPP or are they two completely different things?

Thanks.

AnotherJoe

Yes and no in that order

sandsy

UFPLS and drawdown are both ways of accessing a pension pot.

With drawdown, most people take the maximum tax free lump sum first (25% of the pot) then use the rest of the pot for regular income.

With UFPLS, 25% of each payment is tax free. So it effectively spreads the effect of the tax free lump sum over time. UFPLS can be good for people who have no use for a lump sum and would prefer more income, and enables them to do it in an equally tax efficient way.

There is a phased drawdown approach which can create a similar experience to UFPLS - the key difference is the timing of crystallisation events for tax purposes.

The best method for a specific person will depend on their individual needs for lump sum and income, the overall value of their pension provision and their tax position.

green_man

So if I want to draw a series of UFPLSs (i.e one a month) am I still ‘in drawdown’ as far as the pension provider is concerned?

Most providers make a yearly charge for being in drawdown. I assume you could not avoid this by taking the multiple UFPLS approach?

zagfles

green_man wrote: »

So if I want to draw a series of UFPLSs (i.e one a month) am I still ‘in drawdown’ as far as the pension provider is concerned?

No. The fund remains uncrystallised. You can only take a UFPLS from an uncrystallised fund.

Most providers make a yearly charge for being in drawdown. I assume you could not avoid this by taking the multiple UFPLS approach?

You'll have to check their charges. But taking a UFPLS should have no effect on the charges for the remaining funds, I wouldn't have thought. Their status is unchanged.

green_man

zagfles wrote: »

No. The fund remains uncrystallised. You can only take a UFPLS from an uncrystallised fund. You'll have to check their charges. But taking a UFPLS should have no effect on the charges for the remaining funds, I wouldn't have thought. Their status is unchanged.

This is interesting if it does work this way. As the drawdown charges seem to be several hundred pounds a year typically.

If you have no need for the tax free lump sum would this then be the preferred approach?

zagfles

green_man wrote: »

This is interesting if it does work this way. As the drawdown charges seem to be several hundred pounds a year typically.

If you have no need for the tax free lump sum would this then be the preferred approach?

Depends - loads of other factors to consider. Tax status, LTA, inhertitance, etc...

coyrls

green_man wrote: »

This is interesting if it does work this way. As the drawdown charges seem to be several hundred pounds a year typically.

Charges and charging strategies differ across providers. Many have a specific charge for UFPLS withdrawals.

LHW99

You could UFPLS once a year into a separate instant access a/c and transfer from that monthly for spending. Then its only one UFPLS charge vs 12 if you withdrew monthly.

green_man

coyrls wrote: »

Charges and charging strategies differ across providers. Many have a specific charge for UFPLS withdrawals.

Indeed. I just checked the Halifax charges and it’s £180 per year for flexible drawdown and £90 for each UFPLS. So only worth using UFPLS if you can manage on one sum per year.

green_man

Having just read through the Halifax’s notes on their SIPP it seems I may have misunderstood how ‘drawdown’ works.

I seems that I can only be in Income Drawdown if I take the upfront tax free 25% of the figure in drawdown. I had wanted to simply take monthly payments of which 25% of each payment I expected to be tax free. It seems these type of payments would all have to be UFPLS with associated charge of £90 each.

Does that sound right or am I miss interpreting things?