UFPLS vs flexi access
fred246
Posts: 3,620 Forumite
My wife is a housewife who does small casual jobs earning maybe £2-3K a year. We have been investing into a SIPP with bestinvest. When she is 55 she will have about £30K. I would like to continue to invest £3600 a year while trying to take all the money out without paying tax before she gets her state pension at 67. It seems to make sense to wait till March every year, add up her income, and then take out as much as possible with a UFPLS. However everything I read seems to say flexi-access is better. I can't work out if there is a big difference in charges. Anyone got any advice?
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Assuming normal investment growth and the ongoing contribution it isn't going to last long into the 12 years though is it?
Even if she has applied for Marriage Allowance she has PA of around £10.5k so would be withdrawing £7-8k/year (in taxable income)0 -
Forgot to say she earns about £3k a year in interest. She doesn't need the pension. Opening it and bagging the government contribution seemed a good move.0
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The interest isn't really going to make much any difference in the situation you have outlined.
She has very low income so isn't able to utilise the Personal Savings Allowance but if her casual jobs and taxable pension withdrawals just use up her Personal Allowance then the interest would all fall into the savings starter rate of tax which is currently 0% (a maximum of £5000 can be taxed like this but the amount reduces as wages or pension income exceeds her Personal Allowance, once it is £5,000 over then she would have to rely on the Personal Savings Allowance rate band (also 0% but only for a maximum of £1,000).
So under your plan the interest would probably be fully taxed but no tax to actually pay on it
Going off the threads on here contributing to a pension in this way is extremely popular, particularly when the expectation is that no tax will be payable when the taxable element is taken.
The only thing I would question is if your basic figures add up.
When she is 55 she will have about £30K
Assuming your reference to taking out as much possible means to make her earnings/pension income up to the level of her Personal Allowance then i'm still not convinced that £30k plus ongoing contributions will be sufficient to do this for 12 years.
How have you calculated this?0 -
After marriage allowance her personal allowance is £10660.
Earnings and interest is £6k leaving £4660.
If we withdraw an UFPLS each year of £6213 then £1553 is tax free and £4660 is taxed at 0%.
So we pay in £3600 and withdraw £6213 each year. A net loss of £2613. So £30K lasts 11.5 years ignoring investment returns.
So a yearly UFPLS sounds good to me. However a lot of websites say flexi access is almost always superior. Why would you UFPLS? etc. How much would you pay in charges for a yearly UFPLS? Is flexi access cheaper?0 -
My partner has been using UFPLS exactly as you suggest for several years now. Her SIPP is with AJBell - the UFPLS charge is £30 (£25+VAT) per payment; in addition there are quarterly SIPP management charges (0.25% per year based on the value of the share portfolio) - see here for the full AJBell charges: www.youinvest.co.uk/sipp/charges-and-ratesSo a yearly UFPLS sounds good to me. However a lot of websites say flexi access is almost always superior. Why would you UFPLS? etc. How much would you pay in charges for a yearly UFPLS? Is flexi access cheaper?
Hargreaves Lansdown have a different approach with zero cost for one-off payments but higher portfolio costs (but zero for cash holdings) - see here: https://www.hl.co.uk/pensions/sipp/charges-and-interest-rates
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Surely if you take the UFPLS payment regularly, i.e. every year, you are charged the £100 fee?
I’m on Capped Drawdown with A j Bell and they charge me £100 for my annual withdrawal plus an extra £25 for any other adhoc payments?!?0 -
Hello okydoky,
My spouse (via AJBELL) has taken a UFPLS once per annum for
the last 2 years and has only been charged the £30 fee, each time.
Regards
mrwmartin0 -
Thanks mrwmartin - does seem a bit odd but obviously works in your favour; must be open to interpretation but I would have thought that a payment every year would be considered by them as a “regular” payment?
Got me thinking, and my wife may now go UFPLS instead of Flexi access when the time comes.
So to the OP - if you can save £70 pa in fees, and there’s not much in the decision otherwise, UFPLS might be the way to go!0 -
Thanks mrwmartin - does seem a bit odd but obviously works in your favour; must be open to interpretation but I would have thought that a payment every year would be considered by them as a “regular” payment?
Got me thinking, and my wife may now go UFPLS instead of Flexi access when the time comes.
So to the OP - if you can save £70 pa in fees, and there’s not much in the decision otherwise, UFPLS might be the way to go!
Regular probably means monthly in AJ Bell-speak?0 -
My partner's done three years, all at £30 each!Thanks mrwmartin - does seem a bit odd but obviously works in your favour; must be open to interpretation but I would have thought that a payment every year would be considered by them as a "regular" payment?
The key is to look at the AJBell "SIPP benefit form" (www.youinvest.co.uk/sites/default/files/useful-forms/AJBYI_SIPP_benefit_form-income_drawdown_and_lump_sum_payments.pdf). Option B is for ad hoc UFPLS withdrawals. All the other options (A, C & D) ask for how often do you want the regular payments (monthly, quarterly, half-yearly, annually).
With Option B withdrawals, AJBell don't know when you'll be making the next withdrawal, so they charge the one-off fee rather than the £100pa fee. (It wouldn't make much financial sense to make more that three OptionB UFPLS withdrawals per year!)0
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