Difference between flexi-access-drawdown and UFPLS

UncleZen

I am sure this has been answered before. But I am struggling to understand the difference between the two options above.
Can someone explain it please?

Marcon

Loads of explanations if you just google on your question. For example, see https://thepeoplespension.co.uk/help/knowledgebase/differences-flexi-access-drawdown-ufpls/
or https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/flexi-access-drawdown-vs-ufpls/

Prism

None of the online explanations I have seen explain the differences properly as FAD seems to be to do everything that UFPLS can do.

dunstonh

FAD can be more complicated as it covers taking 25% and nil income through to taking 25% and full 75% income.   And then you have phased FAD which actually closer to UFPLS than Drawdown.  And UFPLS is a form of drawdown.

There is no universally accepted descriptions either.   So, one provider/person may refer to a method using one set of terminology but another may use different terminology.

coyrls

Prism said:

None of the online explanations I have seen explain the differences properly as FAD seems to be to do everything that UFPLS can do.

It can.  UFPLS is a specific form of drawdown.  It's simple to undestand and, I believe, some companies offer UFPLS but not FAD, so it offers a simple to implement option for companies that aren't able to offer the full flexibility of FAD.

legalfreak

I agree with the above posters who said that the differences are not made clear enough for the DIY saver. However, when reading a document from PensionWise, it seems to be saying that using FAD precludes you from taking the UFPLS option later. I suppose this aspect must have been important enough for them to highlight it twice.

TVAS

1. UFPLS = say your fund is 100,000 but you only want to take 10k you can crystallise 10k 2.5k tax free cash 7.5k income which is added to other income earned in that year.

2. Flexi Access Drawdown = you can take 25% of your total fund as tax free cash only. You do not need to take income at that juncture but the next payment will be income as you have used all of your tax free cash entitlement.

UFPLS comes in handy if you are an active member of a money purchase scheme you build up a fund lets say 10k and you want to access it whilst working as additional income knowing you have previous pensions and you are still contributing the scheme that you can now take the 10k built up fund.

Prism

TVAS said:

1. UFPLS = say your fund is 100,000 but you only want to take 10k you can crystallise 10k 2.5k tax free cash 7.5k income which is added to other income earned in that year.

2. Flexi Access Drawdown = you can take 25% of your total fund as tax free cash only. You do not need to take income at that juncture but the next payment will be income as you have used all of your tax free cash entitlement.

UFPLS comes in handy if you are an active member of a money purchase scheme you build up a fund lets say 10k and you want to access it whilst working as additional income knowing you have previous pensions and you are still contributing the scheme that you can now take the 10k built up fund.

With Flexi Access Drawdown you don't need to crystalize your whole pot, so in your example you could move the 10k into drawdown leaving 90k in the pension. Then you could take the 2.5k tax free and either take the 7.5k at the same time or leave it invested untilk you need it.

I believe however that some providers don't offer that option but assuming they someones does, it seems the more flexible option.

cobson

Prism said:

With Flexi Access Drawdown you don't need to crystalize your whole pot, so in your example you could move the 10k into drawdown leaving 90k in the pension. Then you could take the 2.5k tax free and either take the 7.5k at the same time or leave it invested untilk you need it.

I believe however that some providers don't offer that option but assuming they someones does, it seems the more flexible option.

As I understand it, 'plain-vanilla' flexi access drawdown does require you to crystallise your whole pot, taking the lump sum then drawing down from the taxable portion as required.  Providers that use this also generally offer UFPLS as a means of taking the lump sum bit by bit.

Some providers instead offer *phased* flexi access drawdown which is what you describe, where you can choose to only crystallise part of your pot. Where this is offered there is no need for UFPLS.

I assume the latter are using a more modern software platform ?

dunstonh

As I understand it, 'plain-vanilla' flexi access drawdown does require you to crystallise your whole pot, taking the lump sum then drawing down from the taxable portion as required.  Providers that use this also generally offer UFPLS as a means of taking the lump sum bit by bit.

Not necessarily.  You can crystalise part of a pension and that goes into drawdown while the remainder stays uncrystalised.

Some providers instead offer *phased* flexi access drawdown which is what you describe, where you can choose to only crystallise part of your pot. Where this is offered there is no need for UFPLS.

Phased is often used to describe the taking of the 75/25 on a regular basis.  Such as £1000pm being paid as 25% tax free cash and 75% taxable.

However, the terminology is such that what you have described is called phased by some.  And what Prism has described is also called phased by others.

cobson

dunstonh said:

Phased is often used to describe the taking of the 75/25 on a regular basis.  Such as £1000pm being paid as 25% tax free cash and 75% taxable.

Isn't that just the same as UFPLS ?