Private pension 25% lump sum options

Albermarle

as been told UFPLS isn’t best option for this due to crystalisation amount won’t be invested

I think there is some misunderstanding here. After a UFPLS payment, there is no crystallised amount left .
For example.
Pension pot of £100K uncrystallised.
Take UFPLS of £20K = £5K tax free cash and £15K taxable. ( although whether it is taxed or not depends on your personal tax situation)
Remaining is £80K uncrystallised.

Linton

DeadlyD said:

@peteyh you may find my thread interesting. I have taken early retirement at 57yrs and transferred out of my workplace pension into a SIPP - https://forums.moneysavingexpert.com/discussion/6506335/new-sipp-are-my-fund-choices-sensible/p1

@dunstonh @Albermarle apologies to hijack the thread slightly but I’ve done a UFPLS for yr23/24 and want to go into drawdown (as been told UFPLS isn’t best option for this due to crystalisation amount won’t be invested (?)) to access £20k of my 25% pot - how do I “get” my tax free allowance £12570 on top of this? 

I dont understand what you mean by UFPLS not being the best option but on your other question.......

You dont need to do anything to ensure your tax free allowance is actually tax free,  Taxable pensions are paid out through PAYE in exactly the same way as wages using tax codes and tax allowances.

DeadlyD

Albermarle said:

as been told UFPLS isn’t best option for this due to crystalisation amount won’t be invested

I think there is some misunderstanding here. After a UFPLS payment, there is no crystallised amount left .
For example.
Pension pot of £100K uncrystallised.
Take UFPLS of £20K = £5K tax free cash and £15K taxable. ( although whether it is taxed or not depends on your personal tax situation)
Remaining is £80K uncrystallised.

But to take out a larger % of my 25% Tax free + tax free allowance of £12570 I need to go into drawdown? So using your example 
£100k pension - £25k tax free pot 
£75k left 

yr24/25 take out £15k tax free pot + £12570 from £75k to use tax free allowance 

That has to be drawdown right? I want to avoid paying any tax on my pension for as long as I can 

dunstonh

But to take out a larger % of my 25% Tax free + tax free allowance of £12570 I need to go into drawdown? 

If you plan to use the TFC in excess to the personal allowance then you need drawdown.  If you plan to use UFPLS on the total draw then you don't need to go into drawdown.

Albermarle

DeadlyD said:

Albermarle said:

as been told UFPLS isn’t best option for this due to crystalisation amount won’t be invested

I think there is some misunderstanding here. After a UFPLS payment, there is no crystallised amount left .
For example.
Pension pot of £100K uncrystallised.
Take UFPLS of £20K = £5K tax free cash and £15K taxable. ( although whether it is taxed or not depends on your personal tax situation)
Remaining is £80K uncrystallised.

But to take out a larger % of my 25% Tax free + tax free allowance of £12570 I need to go into drawdown? So using your example 
£100k pension - £25k tax free pot 
£75k left 

yr24/25 take out £15k tax free pot + £12570 from £75k to use tax free allowance 

That has to be drawdown right? I want to avoid paying any tax on my pension for as long as I can 

If you want to do it that way then yes drawdown is better.

UFPLS is more used when you do not need all the tax free cash straightaway. So you take a UFPLS of £16,760.
That is £12570 taxable and £4190 tax free . 

peteyh

I'll check out the article cheers 

So the tax free lump option... Its taking a whole 25% of your pot.... 75%crystalised you then choose what & when you make withdrawals from then on in (drawn downs?) as a taxable salary

Can you even take any other tax free lump sum of less than 25% ie 15%/10 etc. Year 1 you choose to access? 

And further more, You cant take 5% Tax free lump sum @ yr1 and then another 5% tax free at yr2 etc as soon as you take a sum year 1 you, the rest of your pot basically goes live and it's taxable from that point.

Dazed_and_C0nfused

peteyh said:

I'll check out the article cheers 

So the tax free lump option... Its taking a whole 25% of your pot.... 75%crystalised you then choose what & when you make withdrawals from then on in (drawn downs?) as a taxable salary

Can you even take any other tax free lump sum of less than 25% ie 15%/10 etc. Year 1 you choose to access? 

And further more, You cant take 5% Tax free lump sum @ yr1 and then another 5% tax free at yr2 etc as soon as you take a sum year 1 you, the rest of your pot basically goes live and it's taxable from that point.

No you can do that if you really want.

Say you have £100k pot.

You take £5k TFLS in year one.  This only crystallises £20k of your pot.  £5k you have taken out as a TFLS and £15k which will be taxable income when taken out.
NB.  If that £15k grows to say £25k before you take it out then the whole £25k is taxable (when taken out).

That leaves £80k not yet crystallised.  So you can, for example, take another £5k TFLS and crystallise another £20k.

Leaving £60k not yet crystallised.

DeadlyD

But to take out a larger % of my 25% Tax free + tax free allowance of £12570 I need to go into drawdown? So using your example 
£100k pension - £25k tax free pot 
£75k left 

yr24/25 take out £15k tax free pot + £12570 from £75k to use tax free allowance 

That has to be drawdown right? I want to avoid paying any tax on my pension for as long as I can 

If you want to do it that way then yes drawdown is better.

UFPLS is more used when you do not need all the tax free cash straightaway. So you take a UFPLS of £16,760.
That is £12570 taxable and £4190 tax free . 

Thanks, I  done that exactly this year ie UFPLS but know want to access more TFLS at the same time take out an additional £12570 for my tax free allowance- is that straightforward in drawdown? 

Albermarle

but know want to access more TFLS at the same time take out an additional £12570 for my tax free allowance- is that straightforward in drawdown? 

Can you even take any other tax free lump sum of less than 25% ie 15%/10 etc. Year 1 you choose to access? 

Two separate questions with one answer. It depends on your pension provider. More modern plans tend to offer more flexibility in what you can do than older ones.
Also a SIPP will tend to have more options than a stakeholder or personal pension. As will pension providers used by IFA's.

What it is possible to do by the current rules and what each provider can do are not necessarily the same. It is mainly related to how current the IT system they are using is.

Albermarle

peteyh said:

I'll check out the article cheers 

So the tax free lump option... Its taking a whole 25% of your pot.... 75%crystalised you then choose what & when you make withdrawals from then on in (drawn downs?) as a taxable salary

Can you even take any other tax free lump sum of less than 25% ie 15%/10 etc. Year 1 you choose to access? 

And further more, You cant take 5% Tax free lump sum @ yr1 and then another 5% tax free at yr2 etc as soon as you take a sum year 1 you, the rest of your pot basically goes live and it's taxable from that point.

As already pointed out your last sentence is incorrect. The best way is to get your head around the crystallisation of pensions, then you will understand it all better.