What is UFPLS (uncrystallised funds pension lump sum)?
UFPLS is a way of taking lump sums from your pension. It's flexible - you choose how much you want to take each time.
25% of every lump sum is tax-free, while the other 75% is taxed as income. The remaining money in your pension pot is not moved into drawdown – but can be at a later date.
Any part of your pension which has been ‘crystallised’ (moved into drawdown) cannot be taken as an UFPLS.
How to take UFPLS (lump sums) from your ii SIPP
There are no charges for taking a lump sum UFPLS payment with ii. It's all covered by your monthly SIPP fee.
- You can now take a lump sum UFPLS payment using our simple online form.
- You’ll need to follow the process every time you want to take a lump sum.
- The process should take around 30 minutes. It usually takes no more than 10 working days after this to receive your payment.
- Click here for a step-by-step guide on how to use the online form.
How is an UFPLS taxed?
When you take an UFPLS, 25% is tax free and 75% is taxable income.
For example, taking an UFPLS of £10,000 means that only £7,500 would count as taxable income. The other £2,500 would be tax free.
It is important to understand how the amount of income you take can affect the amount of Income Tax you will pay. Spreading this over several tax years could reduce your tax bill.
For example, taking a large UFPLS could get you close to your tax free personal allowance. Going over that limit would mean you pay income tax on any further income.
UFPLS payments could also raise your taxable income from a basic rate to a higher rate in a single tax year.
One option is to take your pension income in stages and plan according to your circumstances.
ii won't charge you for taking UFPLS or for using any other income withdrawal options.
When can I take an UFPLS?
You can take an UFPLS as soon as you are able to access benefits from your pension (currently when you turn 55).
There is no limit to the amount of times you can take lump sums from your pension. As long as you have funds remaining which have not been moved into drawdown, you can take an UFPLS.
What is the difference between UFPLS and drawdown?
Drawdown allows you to keep your money invested while withdrawing money when you need to. Whether you choose drawdown or an UFPLS, you can take 25% of your pension as tax-free cash.
The following gives an example of each option with a £100,000 pension pot.
Drawdown (entire fund)
- Take 25% (£25,000) as tax-free cash.
- Move remaining 75% (£75,000) into drawdown (taxed as income when withdrawn).
Flexi-access drawdown (part of your fund)
- Move a portion (eg £20,000) of your pension pot into drawdown.
- Take 25% (£5,000) of that portion as tax-free cash. The rest (£15,000) goes into drawdown (taxed as income when withdrawn).
- Remaining pension pot (£80,000) is available to move into drawdown or take as an UFPLS.
- Take a portion (eg £20,000) of your pension as cash.
- Receive 25% (£5,000) of that portion as tax-free cash. Take 75% (£15,000) as taxed income.
- Remaining pension pot (£80,000) is available to move into drawdown or take as a UFPLS.
Can I still pay into my pension after taking an UFPLS?
Taking an UFPLS triggers the Money Purchase Annual Allowance (MPAA) which reduces your annual allowance for pension contributions to £4,000.
Open a SIPP today and pay no SIPP fee for six months
This means your service plan fee of £9.99 covers you for all of your investment accounts. Following the offer period, the ii SIPP fee is only £10 a month more, and could save thousands compared to other pension providers who charge a percentage fee. Terms apply
Please remember, SIPPs are aimed at people happy to make their own investment decisions. Investment value can go up or down and you could get back less than you invest. You can normally only access the money from age 55 (57 from 2028). We recommend seeking advice from a suitably qualified financial advisor before making any decisions. Pension and tax rules depend on your circumstances and may change in future.