UFPLS in one go

River11_2

I have been taking some of my pension as UFPLS payments for the last 12 months, drawing off the cash I have in my SIPP pension with Interactive Investor at the rate of £1.300.00 pm.

As I have the 25% tax free portion and my standard tax code, it enables me not to pay any tax. 

However, as the cash in my pension only earns a small amount of interest I am thinking it would be better to withdraw my full years amount in one go and put the rest in an easy access savings account which pays a higher rate of interest. Ie: withdraw approximately £16,500.00 in one go. 

My question is, would this be seen as looking like I’m going to take more big lump sums from my pension, so I would be taxed on the remaining 75% (£2,475) at point of withdrawal?
Or is there another way?
Nb; I haven't taken the full 25% tax free lump sum from my pension yet.
Thought I'd try here first before Pensionwise.

I understand if I take extra withdrawals then I would be taxed. 
Thanks in advance.

molerat

What tax code is allocated to the pension ?  The only way to take it in one hit without paying tax is by taking it in March so the whole of the year's tax allowance is set against it.  Taking it earlier will only have x/12ths of the allowance allocated depending on month.  The other option is to take the majority early in the year, take the tax hit then take a small amount in March to get that tax refunded. You could always apply for a tax refund in year if you take it all early.  Most people take it in a way that causes least messing around and for filling.

River11_2

Tax code is Standard 1275L. I’ve used my allowance this tax year so was looking at April,  but from what you say it has confirmed what I thought.
Never thought about the two payment option though. Will look into that to see if it’s feasible. 

green_man

I take one UFPLS per year, and as you say, stick it in a savings account and transfer a portion each month to my current account.  My main driver was minimising charges which for my provider was much more expensive doing the monthly UFPLS option.  
Despite me contacting HMRC I didn’t seem to be able to get the tax sorted ahead of time, so….yes I do pay a large tax charge on the payment,  however this isn’t really a big issue as you just fill in a P55 form online and get the refund within a few weeks,  when you’ve been through it once it takes about 10 minutes (assuming a simple scenario)

River11_2

green_man said:

I take one UFPLS per year, and as you say, stick it in a savings account and transfer a portion each month to my current account.  My main driver was minimising charges which for my provider was much more expensive doing the monthly UFPLS option.  
Despite me contacting HMRC I didn’t seem to be able to get the tax sorted ahead of time, so….yes I do pay a large tax charge on the payment,  however this isn’t really a big issue as you just fill in a P55 form online and get the refund within a few weeks,  when you’ve been through it once it takes about 10 minutes (assuming a simple scenario)

Excellent, that’s what I’ll do. Seems simple enough. Thanks for that. 

midlandsimon

Monthly UFPLS must be a nightmare for providers with the amount of paperwork/illustrations/reporting they have to issue. Basically 12 separate crystallisations each year. No wonder they charge for it!! 

When first starting any withdrawal from a pension/new provider. You are best to ask them to run you through a nil payment on their payroll. This will get you a tax code on the system rather than them running through on the emergency tax code pending issue from HMRC. 

HMRC were really helpful when we first started drawing money from pensions. They advised-

If the lump sum payment:

• used up your pension pot and you have no other income, complete form P50Z

• used up your pension pot and you have other taxable income, complete form P53Z

• did not use up your pension pot and you are not taking any more payments from the plan in this tax year, complete form P55

• did not use up your pension pot, then any further income payments will carry on being taxed under the current tax code

Hope that helps.

dunstonh

Monthly UFPLS must be a nightmare for providers with the amount of paperwork/illustrations/reporting they have to issue. Basically 12 separate crystallisations each year. No wonder they charge for it!! 

The vast majority of providers do not charge for monthly UFPLS.      The big platforms/providers have daily payroll runs and highly automated systems. So, it doesn't matter to them that there are 12 as it's just another line entry each month.

One advantage of monthly UFPLS is a payment in each payroll/PAYE period over the year.  So, tax will be accurate by the March payment.     So, no need to run an extra UFPLS/drawdown payment in March or alternatively do a P55.

Albermarle

Monthly UFPLS must be a nightmare for providers with the amount of paperwork/illustrations/reporting they have to issue. Basically 12 separate crystallisations each year. No wonder they charge for it!! 

This issue seems to vary between the retail/DIY providers often mentioned on here, and some seem to be improving/streamlining their systems , so one lot of paperwork/admin cover say 6 months, or you can do it more online.

The vast majority of providers do not charge for monthly UFPLS.      The big platforms/providers have daily payroll runs and highly automated systems. So, it doesn't matter to them that there are 12 as it's just another line entry each month

Dunstonh- Is this not related to the fact you are an IFA, so the provider does not need to check that you know what you are doing with every payment. The problem with some DIY platforms, is that  because every UFPLS is a  crystallisation event, they feel obliged to ask questions/tick boxes every time.

dunstonh

Dunstonh- Is this not related to the fact you are an IFA, so the provider does not need to check that you know what you are doing with every payment. The problem with some DIY platforms, is that  because every UFPLS is a  crystallisation event, they feel obliged to ask questions/tick boxes every time.

It is certainly notable that DIY platforms are less likely to offer it as a regular method but virtually all IFA platforms/providers do.

There is no reason why a DIY provider cannot offer regular UFPLS from a regulatory point of view.  They just need to issue the risk warnings  at the start.    Each monthly draw is a BCE but there is no requirement to ask questions every time.    It is input once, and then each month (or whatever frequency), the process is automated.

 I suspect It is more likely that they didn't set their software up to do it.   It would have required more coding and many would not have expected it to be as popular as it is.   Intermediary platforms may have had the advantage that phased UFPLS has been an option for IFAs to use for decades (in its previous guise).   So, coding would have been easier to adapt to the new language and rules.

Dazed_and_C0nfused

midlandsimon said:

Monthly UFPLS must be a nightmare for providers with the amount of paperwork/illustrations/reporting they have to issue. Basically 12 separate crystallisations each year. No wonder they charge for it!! 

When first starting any withdrawal from a pension/new provider. You are best to ask them to run you through a nil payment on their payroll. This will get you a tax code on the system rather than them running through on the emergency tax code pending issue from HMRC. 

HMRC were really helpful when we first started drawing money from pensions. They advised-

If the lump sum payment:

• used up your pension pot and you have no other income, complete form P50Z

• used up your pension pot and you have other taxable income, complete form P53Z

• did not use up your pension pot and you are not taking any more payments from the plan in this tax year, complete form P55

• did not use up your pension pot, then any further income payments will carry on being taxed under the current tax code

Hope that helps.

That will no doubt work for some people but it won't for everyone as the pension payer reporting a nil payment will initially mean HMRC estimate the taxable income for that tax year as £0.

Which could result in a different tax code to what might otherwise be calculated.

And I doubt all providers will agree to do it in the first place.

River11_2

As I’m self invested (used to be with St James’s place! Who were Useless) I’ve also been with L&G and Aegon. I’ve not found an IFA yet who’s been any benefit to me that I can’t do myself, I also quite enjoy it (well the last 18 months have been testing). But 2009/18/20/22/23 were also testing. 

Having said that I will use an IFA when I’m amalgamating more complex issues.

I find UFPLS quite a simple process, yes you have to go through all the usual tick box stuff, but it doesn’t take too much time.

Interactive investor don’t charge for the UFPLS payments either and compared to all other platforms they are extremely good value (on +£250k is the best value tipping point) and wouldn’t change. The research interface isn’t great so tend to use trustnet.

Agree that I was surprised how helpful HMRC were. And didn’t go on any emergency tax code at any point.