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  • FIRST POST
    • fred246
    • By fred246 5th Aug 18, 12:49 PM
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    fred246
    UFPLS vs flexi access
    • #1
    • 5th Aug 18, 12:49 PM
    UFPLS vs flexi access 5th Aug 18 at 12:49 PM
    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?
Page 1
    • Dazed and confused
    • By Dazed and confused 5th Aug 18, 1:01 PM
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    Dazed and confused
    • #2
    • 5th Aug 18, 1:01 PM
    • #2
    • 5th Aug 18, 1:01 PM
    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)
    • fred246
    • By fred246 5th Aug 18, 1:16 PM
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    fred246
    • #3
    • 5th Aug 18, 1:16 PM
    • #3
    • 5th Aug 18, 1:16 PM
    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.
    • Dazed and confused
    • By Dazed and confused 5th Aug 18, 8:42 PM
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    Dazed and confused
    • #4
    • 5th Aug 18, 8:42 PM
    • #4
    • 5th Aug 18, 8:42 PM
    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?
    Last edited by Dazed and confused; 05-08-2018 at 8:46 PM.
    • fred246
    • By fred246 6th Aug 18, 3:02 AM
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    fred246
    • #5
    • 6th Aug 18, 3:02 AM
    • #5
    • 6th Aug 18, 3:02 AM
    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?
    Last edited by fred246; 06-08-2018 at 4:14 AM.
    • pafpcg
    • By pafpcg 6th Aug 18, 12:54 PM
    • 252 Posts
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    pafpcg
    • #6
    • 6th Aug 18, 12:54 PM
    • #6
    • 6th Aug 18, 12:54 PM
    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?
    Originally posted by fred246
    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-rates
    Hargreaves Lansdown have a different approach with zero cost for one-off payments but higher portfolio costs (but zero for cash holdings) - see here: www.hl.co.uk/pensions/sipp/charges-and-interest-rates
    Last edited by pafpcg; 06-08-2018 at 1:02 PM. Reason: add HL charges
    • okydoky
    • By okydoky 6th Aug 18, 1:37 PM
    • 235 Posts
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    okydoky
    • #7
    • 6th Aug 18, 1:37 PM
    • #7
    • 6th Aug 18, 1:37 PM
    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?!?
    • rangersfc
    • By rangersfc 6th Aug 18, 2:40 PM
    • 40 Posts
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    rangersfc
    • #8
    • 6th Aug 18, 2:40 PM
    • #8
    • 6th Aug 18, 2:40 PM
    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
    mrwmartin
    Last edited by rangersfc; 06-08-2018 at 2:42 PM. Reason: SPELLING
    • okydoky
    • By okydoky 6th Aug 18, 3:15 PM
    • 235 Posts
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    okydoky
    • #9
    • 6th Aug 18, 3:15 PM
    • #9
    • 6th Aug 18, 3:15 PM
    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!
    • ffacoffipawb
    • By ffacoffipawb 6th Aug 18, 4:14 PM
    • 2,488 Posts
    • 1,641 Thanks
    ffacoffipawb
    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!
    Originally posted by okydoky
    Regular probably means monthly in AJ Bell-speak?
    • pafpcg
    • By pafpcg 6th Aug 18, 4:31 PM
    • 252 Posts
    • 233 Thanks
    pafpcg
    AJBell UFPLS withdrawals
    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?
    Originally posted by okydoky
    My partner's done three years, all at £30 each!

    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!)
    Last edited by pafpcg; 06-08-2018 at 4:35 PM. Reason: Frequency of payments added to answer ffacoffipawb's question
    • MK62
    • By MK62 6th Aug 18, 6:26 PM
    • 194 Posts
    • 138 Thanks
    MK62
    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?
    Originally posted by fred246
    Which websites are saying flexi-access is almost always superior?
    • fred246
    • By fred246 7th Aug 18, 3:11 AM
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    • 582 Thanks
    fred246
    I think a lot of websites were talking along similar lines but the one that stood out was:

    https://www.moneymarketing.co.uk/ufpls-vs-drawdown/

    Thanks for all the replies. I was starting to think that maybe nobody really used UFPLS but it seemed the best for me.
    • pafpcg
    • By pafpcg 7th Aug 18, 11:52 AM
    • 252 Posts
    • 233 Thanks
    pafpcg
    I think a lot of websites were talking along similar lines but the one that stood out was: https://www.moneymarketing.co.uk/ufpls-vs-drawdown/
    Originally posted by fred246
    I took a look at the article in Money Marketing - it certainly raised my eyebrows!

    First, look at the source; this is a financial adviser talking to other financial advisers.

    It's littered with hyperbole: look what he says in his first paragraph "If there is a straight choice between flexi-access pension drawdown and uncrystallised funds pension lump sum, flexi-access wins by a country mile in virtually every situation" and the third ".... it is hard to see why one would choice [sic] UFPLS in any situation", then contrast those statements with what he says later: "To be fair to UFPLS, there is one situation in which it is as good as flexi-access and might even be superior in some circumstances", "In such a situation, the UFPLS solution might sometimes be cheaper than the flexi-access solution, especially if it does not involve the expense of making a transfer to another scheme" and "AJ Bell has identified another (fairly rare) position where UFPLS might be slightly advantageous". My conclusion is that he's an advocate for one approach and concedes the advantages of a different approach only grudgingly.

    Read the comments, several of which point out errors in the article or just plain disagree.

    Now look at the supposed date of the article on the web-site: June 2017, but most of the comments date from 2015 - it's really a three year old article from June 2015, so I'll quote the whole of one of the later comments from November 2017:
    "Worth revisiting this article 2 years on to see what has happened in practice.
    UFPLS was derided at first as a way of accessing "zombie" pension funds and FAD was seen as the knight in shinging armour.
    We’ve only recommended FAD where there has been a need to raise capital (not all instances have we recommended taking the full 25% PCLS) and UFPLS where there is a need for income.
    In summary if FAD was the hare then UFPLS is definitely the tortoise."
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