Pension UFPLS then move to Tax Free cash in stages

Silverwirerhino

I gave up work in March and was in the process of moving to drawdown (very bad timing). That's now on hold until the markets sort themselves out. But, as I'm not working I would like to use my tax allowance this year and do a UFPLS of around £15k, then claim the tax back. When the markets improve I then plan to use Flexi Drawdown for staged withdrawals of the Tax free cash (over the early years). The UFPLS rules affect Lifetime allowance, but I'm concerned there may be a restriction on taking the Tax free cash ONLY via Flexi drawdown the following years. I must admit I'm finding the rules a minefield, but I can't see this would be a problem or is there a RED flag.
Any experience of this would be appreciated.       

Malthusian

As long as you haven't crystallised the entire fund (i.e. no more 25% tax free cash) or used up all your lifetime allowance there is nothing to stop you taking a £15k UFPLS from an uncrystallised fund, and then designating the rest of the uncrystallised fund to income drawdown, taking tax free cash with no taxable income.

Are you planning to pay pension contributions in the future? The UFPLS will trigger the Money Purchase Annual Allowance (taking tax free cash only via income drawdown would not), and I'm wondering if that's the red flag you're thinking of.

If you're already "in the process of" moving to drawdown, does that mean you already have crystallised funds you could take some or all of the £15k taxable income from?

You are aware that £15k UFPLS would only generate taxable income of £11,250 and the personal allowance is £12,500?

jamesd

What I recently did was UFPLS immediately followed by putting the rest into drawdown to get the tax free 25% from that. I could have left some untouched for later UFPLS.

Markets are irrelevant. You can keep the same investments.

Notepad_Phil

Silverwirerhino said:

I gave up work in March and was in the process of moving to drawdown (very bad timing). That's now on hold until the markets sort themselves out. 

What were you proposing to do which has meant that you've put it on hold?

To me, times like now are a great time to go into drawdown as it reinforces the fact that your strategy needs to be able to cope with the buffeting that the markets will throw at you from time to time and the sometimes big falls that will inevitably occur over the next 20 to 30 years.

If your strategy relies on the market never falling or of returning in the near future to where it was, then you might need to reconsider your strategy.

Silverwirerhino

Thanks for the replies which have answered my questions. Just to clarify some of your points. As I an now 65 and no further planned earnings the Annual Allowance should not be a problem. I have not crystallised any money as yet, but when I do I will ensure I use my full tax allowance. In my case the markets are relevant for my larger pension, as it is part invested in With profits and Property funds (it's a very old scheme). Property is frozen and WP has reduced, I assume because of the terminal bonus (MVR is not active). When the markets steady I hope the Actuaries have a more realistic view of the estate distribution.
Moving to drawdown I would have to sell and crystallise losses. This is why I'm on hold. 
I do expect losses, which is why I hold 3 years cash. I can take my time and have other investments to play higher risk games with (although I'm learning fast to be cautious here as well). 
My instinct is to wait until there is clarity on a solution to COVID and the economic impact..   
Thank again.