UFPLS vs. Flexi-Access Drawdown policy

old_codger1

Hi,

I have two pensions 'pots'. One has about £46k and the other, about £21k in.

They're both with Reassure.

My 63rd birthday is on 16th April and I have no income atm apart from some interest from my savings, (which are presently how I'm living), and my partners pension.

As I understand it I can take them either as 'Uncrystallised Funds Pension Lump Sum', or UFPLS OR as a 'Flexi-Access Drawdown' as per the advice here...

https://www.reassure.co.uk/pensions/leave-invested-flexibility/

Looking at that information from reassure it seems that the UFPLS means that, as well my taxable free income allowance for this year, (about £11k), I can take 25% of my total pension pot, (about £16.75k being 25% of £67k), in a lump-sum this financial years and then take another £11k some time after April.

IOW I think I could take £27k now and THEN take another £11k in about a month or so time with a UFPLS.

Does that seem right?

So, would it better to take a UFPLS or a drawdown?

dunstonh

As I understand it I can take them either as 'Uncrystallised Funds Pension Lump Sum', or UFPLS OR as a 'Flexi-Access Drawdown' as per the advice here...

or annuity or the variations on drawdown. You are not limited to certain things just because a provider does not offer them. You can always move provider if they do not offer the method you want.

So, would it better to take a UFPLS or a drawdown?

You should use the method of drawdown that suits your requirements. Without knowing what they are, no-one can answer your question on which is best.

old_codger1

dunstonh wrote: »

or annuity or the variations on drawdown. You are not limited to certain things just because a provider does not offer them. You can always move provider if they do not offer the method you want.

You should use the method of drawdown that suits your requirements. Without knowing what they are, no-one can answer your question on which is best.

Good point!

I will add the money to my savings to help my stepdaughter buy a house so, basically, I want to get all of the money out of my pension as quickly as possible whilst paying as little tax as possible. I realise this will take a few years and also that, inevitably, I will have to pay SOME tax.

I'm just trying to get my head around the difference between the two types of draw-down.

My initial understanding, when I first looked at this, was that the first 25% of the flexi-access drawdown would be tax-free but the reassure site seems to indicate that's NOT the case.

Maybe this comes back to your point about different providers offering different terms but then, that can't be the case with the tax rules, surely, can it?

dunstonh

I will add the money to my savings to help my stepdaughter buy a house so, basically, I want to get all of the money out of my pension as quickly as possible whilst paying as little tax as possible. I realise this will take a few years and also that, inevitably, I will have to pay SOME tax.

When will that be? Keeping it in the pension until it is needed may be the best option. However, tax planning may mean spreading it across tax years may be better.

I'm just trying to get my head around the difference between the two types of draw-down.

There are more than two methods. (variations of a theme mainly).

My initial understanding, when I first looked at this, was that the first 25% of the flexi-access drawdown would be tax-free but the reassure site seems to indicate that's NOT the case.

Depends on how you do it.

If you take multiple ad-hoc lump sums, you can either take the whole 25% in the first one or you can take 25% of each withdrawal. The first method would require the plan to support drawdown. The second method would require the plan to support partial UFPLS.

Maybe this comes back to your point about different providers offering different terms but then, that can't be the case with the tax rules, surely, can it?

Tax rules are the same. However, providers dont explain all methods. Just the ones they offer.

old_codger1

dunstonh wrote: »

When will that be? Keeping it in the pension until it is needed may be the best option. However, tax planning may mean spreading it across tax years may be better.

Well, tomorrow would be nice

I will be getting my state pension when I'm 66 so, in 3 years time. Until then I'm guessing I will be able to take my tax-free amount in the form of a drawdown, (in one form or another), so that would be, say, 3 X £11k - £33k.

So if I'm able to take 25% of the total pension 'pot' of about £67k, (so roughly £16k), PLUS the £11k for this year making a total withdrawal THIS YEAR of £27k.

IOW it should mean I can take £60k out over the next 3 years, (£27k plus £33k)...

I think... :eek:

dunstonh wrote: »

There are more than two methods. (variations of a theme mainly).



Depends on how you do it.

If you take multiple ad-hoc lump sums, you can either take the whole 25% in the first one or you can take 25% of each withdrawal. The first method would require the plan to support drawdown. The second method would require the plan to support partial UFPLS.

Tax rules are the same. However, providers dont explain all methods. Just the ones they offer.

By the looks of it, then, based on my thinking as set out above, is the first option, i.e. a drawdown where I can take the full 25% of the TOTAL pension pot of £67k in the first payment and then use my further allowances over the next 3 years to get almost all the cash out.

The problem with all this is, you only tend to do it once.

BTW, appreciate your help mate. I give help on some other forums with IT and network security and everybody chipping in with some help in areas where they have expertise certainly makes life easier

xylophone

See

https://www.pensionwise.gov.uk/en?gclid=EAIaIQobChMIu8PnnNj72QIVpbftCh263wlnEAAYASAAEgLXXvD_BwE

http://www.taxvol.org.uk/about-tax/entitled-10-band-savings-interest/

The standard single personal allowance for 2017-18 is £11,500 and for 2018-19 £11,850.

Anything over the 25% PCLS is taxed as non savings income.

Dazed_and_confused

My 63rd birthday is on 16th April and I have no income atm apart from some interest from my savings, (which are presently how I'm living), and my partners pension

Anything over the 25% PCLS is taxed as non savings income.

If your only income is the pension payment you are thinking of taking then you are likely to be able to benefit from the starter savings tax rate where upto £5,000 of savings interest is taxed at a rate of 0%.

The £5,000 gets reduced if your non savings income exceeds the Personal Allowance and is removed completely if your non savings income reaches £16,500 (current tax year). But if that happened you would be able to benefit from the Personal Savings Allowance instead (another 0% tax rate).

jamesd

old_codger1 wrote: »

Until then I'm guessing I will be able to take my tax-free amount in the form of a drawdown, (in one form or another), so that would be, say, 3 X £11k - £33k.

So if I'm able to take 25% of the total pension 'pot' of about £67k, (so roughly £16k), PLUS the £11k for this year making a total withdrawal THIS YEAR of £27k.

IOW it should mean I can take £60k out over the next 3 years, (£27k plus £33k)

Yes, you can do that and it's an efficient way to go. It's PCLS (the 25% ta x free lump sum) on the whole pot with the other 75% placed into a flexi-access drawdown account from which you take the taxable but no eventual tax to pay personal allowance amount.

Are you also paying £2880 net into a pension to get the free £720 a year from doing that? You get 25% added to give you basic rate tax relief even if you pay no tax.

old_codger1

Dazed_and_confused wrote: »

My 63rd birthday is on 16th April and I have no income atm apart from some interest from my savings, (which are presently how I'm living), and my partners pension

Anything over the 25% PCLS is taxed as non savings income.

If your only income is the pension payment you are thinking of taking then you are likely to be able to benefit from the starter savings tax rate where upto £5,000 of savings interest is taxed at a rate of 0%.

The £5,000 gets reduced if your non savings income exceeds the Personal Allowance and is removed completely if your non savings income reaches £16,500 (current tax year). But if that happened you would be able to benefit from the Personal Savings Allowance instead (another 0% tax rate).

Oh dear... I thought I'd got it straight

So, to be clear, does that mean I can also take another £5,000 tax free if the withdrawal from my pension pot is my only income?

Actually I DO have a small income which is interest from my savings. That's about 1% of the savings of £65k, i.e. about £650 which, presumably, would reduce that tax-free amount to roughly £4,350.

OR does the fact that I'm taking the pension withdrawal, itself, mean that my 'non savings income' is £27k for this year so above the £16.5k limit you mention.

old_codger1

jamesd wrote: »

Yes, you can do that and it's an efficient way to go. It's PCLS (the 25% ta x free lump sum) on the whole pot with the other 75% placed into a flexi-access drawdown account from which you take the taxable but no eventual tax to pay personal allowance amount.

SO, no eventual tax to payASSUMING my total income for the tax year is less than my tax free pay for the year in question, i.e. about £11,850 or whatever.

jamesd wrote: »

Are you also paying £2880 net into a pension to get the free £720 a year from doing that? You get 25% added to give you basic rate tax relief even if you pay no tax.

Hang on. I'm taking money OUT of my pension. Why would I want to start paying it in again?

MallyGirl

to get £720 per annum from the government for free?