UFPLS v flexi drawdown v other - options when living cost income isn't required

the-chauffeur_2

After doing a bunch of research I'm struggling to work out the efficacy of various options for a (slightly peculiar?) situation I may find myself in soon-ish.

I'm approaching the point where I can decide whether I need to work in future.  I don't particularly like what I do for work right now.  Benefits are great, salary not so much, environment is not particularly positive.  No desperate desire to get another job but it not ruling it out - either way it's unlikely to be full-time. 

Outgoings are very low due to a combination of life events/choices (property owned outright/no little people/dependents) and look unlikely to change.  Still some way off state pension age but have defined contribution funds that can be accessed at 55.  Investment strategy for the pension is on the adventurous end due to long time horizon and sufficient other reserves.  To that end, even if I stop working I'm unlikely to need to withdraw anything from the pension for some time - possibly up to state retirement age.  

Whilst I may not need pension funds for some time, I think there would be advantages in me pulling an amount out each year and doing something like bed-and-ISA-ing (if that's the right expression) some of the pension cash.  The logic being that even though I don't immediately need the cash, I should be able to utilise the personal allowance each year plus a small-ish amount of TFC to maximise tax-exempted/free options whilst shifting otherwise locked down funds into similar investment funds in a more flexible environment (again no dependents so not concerned about death stuff like IHT). 

So I guess my questions are is the logic of utilising the personal allowance sound and what route would likely be the most advantageous between UFPLS or flexi?

Thanks in advance folks.

NoMore

So basically you want to draw out £16760 a year. Mathematically it makes no difference doing it via UFPLS or FAD. However your provider may deal with one method easier than the other.

zagfles

In terms of tax efficiency they're basically the same, eg

a) taking a UFPLS of £16760 each year, or 
b) phased drawdown crystallising £16760 each year and taking £4190 tax free up front and £1047.50 a month, or
c) using monthly UFPLS and taking £1396.67 a month.

There'll be virtually no difference in tax efficiency so the bigger issue is what's easiest with your provider, and with management of tax. Most providers won't offer all the options, or will make some hard, so see what's easiest with your provider. With annual UFPLS you might find yourself paying a large amount of tax which you have to reclaim. Monthly UFPLS is generally offered by workplace schemes but with SIPPs they usually require separate applications each month which would be a hassle. Workplace schemes often don't offer phased drawdown or make it hard like creating separate accounts each time.

the-chauffeur_2

Thanks.  The maths as to the withdrawal amount I kinda get - and that it's the same for both. 

The bit I'm having trouble with is what I would need to crystalise under FAD using a phased approach for each year's withdrawal and what downsides that comes with (faster depletion of the TFC element maybe?).  That and whether it would be more advantageous to pull the amount from UFPLS without crystalising anything over the withdrawal amount.  

For most folks the big advantage of FAD seems to be that it won't impact the MPAA.  Again, anything could happen but I can't see me worrying too much about that . . . 

NoMore

FAD you crystallise 16760. get 4190 of it as tax free cash then draw the rest 12570 from crystalised funds which is taxable but below the allowance so no tax due. The rest of your pension is still uncrystallised. You end up in exactly the same position when using UFPLS. There's no difference. Your over thinking it.

In order to take advantage of the Personal Allowance, you need to draw taxable income from the pension, so the MPAA will be triggered either way.

the-chauffeur_2

Ah - cool.  Yup - overthinkers anonymous are on speed dial.

And thanks for the pointer on the MPAA being triggered either way.  I could see how it worked with UFPLS but was a bit blindsided on FAD.  Makes more sense now.